Empirical Evidence on How CEO Option Incentives Spur Corporate Innovation from Panel Analysis with Lagged Incentives

DOI

10.2991/978-94-6239-642-5_43How to use a DOI?

Keywords

CEO Option Incentives; Corporate Innovation; Panel Regression; Lagged Effects; Heterogeneity Analysis

Abstract

This study examines the real effects of Chief Executive Officer (CEO) option incentives on corporate innovation output, assessing whether this contractual instrument can effectively bridge the inherent tension between managerial risk aversion and the uncertainty inherent in innovation activities. Based on data from U.S.-listed companies from 1993 to 2021, the research systematically investigates the immediate impact of option incentives on patent applications and their sustained, cross-period effect on patent grants. The empirical findings reveal that option incentives significantly promote corporate innovation, and this effect persists for up to two years after the grant. Further analysis shows that this effect is not universal but is strictly limited to industries with greater suitability for option contracts, such as technology-intensive sectors, and is more pronounced in sub-samples of larger firms and those with higher leverage. These findings confirm that the relationship between option incentives and innovation output is more likely to be a context-dependent causal relationship than a mere correlation. This study deepens the understanding of how executive compensation design influences corporate innovation strategy.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Yuchen Luo
PY  - 2026
DA  - 2026/04/29
TI  - Empirical Evidence on How CEO Option Incentives Spur Corporate Innovation from Panel Analysis with Lagged Incentives
BT  - Proceedings of the 2026 11th International Conference on Financial Innovation and Economic Development (ICFIED 2026)
PB  - Atlantis Press
SP  - 436
EP  - 449
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-642-5_43
DO  - 10.2991/978-94-6239-642-5_43
ID  - Luo2026
ER  -