Heterogeneity in the Effect of Managerial Equity Incentives on Firm Value

We document significant heterogeneity in the relation between chief executive officer (CEO) equity incentives and firm value using quantile regression. We show that CEO delta is more effective in the presence of ample investment opportunities, while CEO vega is more beneficial for firms lacking investment opportunities. Further, Tobin's Q increases in CEO delta for more risk-tolerant firms but increases in CEO vega for more risk-averse firms. We also observe that higher monitoring intensity after the Sarbanes-Oxley Act reduces CEO delta's role in compensation. Risk aversion alters the optimal incentive-value relation, and the nature of this relation also depends on the level of Tobin's Q.