Executive stock options and organizational capital: evidence from US firms

Purpose This paper examines the impact of executive stock-based compensation on organizational capital. Specifically, the use of equity-based incentives, such as stock options, impacts long-term investment in organizational strategic resources, including innovation and employee development. Design/methodology/approach We analyze data from both financial and non-financial US firms from 1997 to 2020 and use fixed-effects panel regressions and a dynamic panel model, the generalized method of moments as a robustness check. Findings The findings indicate that option grants, exercised stock options and unexercised stock options have a significant influence on organizational capital. Among these, unexercised stock options have the most notable effects, suggesting that the potential for future gains encourages executives to focus on long-term organizational growth. Practical implications The research offers valuable insights into enhancing organizational capital through stock-based compensation, suggesting that a corporation can improve its productivity and market competitiveness. Originality/value This paper examines how executive stock-based compensation impacts organizational capital in US companies, offering new evidence on how incentive structures contribute to corporate value creation.