Executive equity incentive plans: Effective golden handcuffs?*

We examine the impact of executive equity incentive plans (EEIPs) on the retention of targeted (those subject to EEIPs) and non-targeted (those not subject to EEIPs) executives using a sample of Chinese firms. Our findings suggest that EEIPs help retain executives if we do not distinguish targeted and non-targeted executives. Using a difference-in-differences research design, we find that, on average, targeted (non-targeted) executives in EEIP firms have an approximately 16% lower (43% higher) chance of leaving their current jobs than the average turnover rate of executives in a non-EEIP firm. Additional analysis suggests that 1) the golden-handcuff effect on targeted executives occurs primarily in the first two years of EEIPs, while the push-away effect on non-targeted executives lasts for four years, and 2) non-targeted executives are more likely to leave when they have low compensation.