"Equity Vesting and Managerial Myopia" by Assistant Professor Vivian Fang won the Wharton School-WRDS Award for the Best Empirical Finance paper at the 2015 Western Finance Association Meeting. The paper was co-authored by Alex Edmans of London Business School and Katharina Lewellen of Dartmouth College.
This year, there were 1,776 papers submitted to the Western Finance Association Meeting. Among the 144 papers that made the program, only five best paper awards were given in different categories.
In the paper, Fang introduces a new measure of a manager's myopic incentives – the price sensitivity of equity vesting over the coming year that is unlikely to be driven by the current contracting environment. She used this measure as an instrument for actual equity sales and shows that an interquartile increase in instrumented equity sales is associated with a 0.14 percent decline in the growth of R&D/assets, 2.6 percent of the average R&D/assets ratio. Vesting-induced equity sales are also associated with a higher likelihood of meeting or marginally beating analyst earnings forecasts and higher earnings announcement returns.