Valuing restricted stock grants to non-executive employees

Menachem Meni Abudy, Simon Benninga

Research output: Contribution to journalArticlepeer-review


We estimate the value of restricted stock (RS) grants to non-executive employees using a unique proprietary database by calibrating theoretical models that account for the non-marketability of securities and the potential effects of the employee's non-diversification. The calibration results predict an average discount of 30.3% on the RS grant. This discount depends on firm and industry characteristics, is significantly higher during the financial crisis and robust across time and across industries. The discount increases when the employee is undiversified because of the granted stocks. The findings contribute to the discussion on the efficiency of RS grants to non-executive employees, which became a dominant form of equity-based compensation.

Original languageEnglish
Pages (from-to)33-51
Number of pages19
JournalJournal of Economics and Business
StatePublished - 1 Jul 2016


  • Non-marketability discount
  • Restricted stocks compensation

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • General Business,Management and Accounting


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