LTIP use. To test hypotheses predicting the likelihood of
LTIP use, we created a dichotomous measure, coded as 1 if
any units or shares were granted during the year of adoption
or the year thereafter, and 0 otherwise. An observation
period of two years rather than just one year was used
because some companies make long-term incentive grants
biannually.A longer observation period seems unnecessary,
given that firms intending to use LTIPs have no obvious
incentive to delay implementation. Nonetheless, we also
examined in a separate analysis whether our results were
somehow sensitive to the two-year observation period
chosen. Results showed that extending the time period for
observing grants to three or four years had no substantive
effect on the multivariate results.