85 NTU Management Review Vol. 31 No. 1 Apr. 2021 where industry-adjusted performance is estimated by industry-adjusted profitability (IAROA) and industry-adjusted market-to-book ratio (IAM/B), respectively. The industryadjusted performance means the performance variables relative to the industry median. The industry median is defined yearly by all firms with the same two-digit SIC codes in the COMPUSTAT database. Due to the endogeneity concern, we include lagged profitability (IAROAt-1) or market-to-book ratio (IAM/Bt-1) in the models. Aveleverage is the average leverage over the prior two years and Avesalegrowth is the average sales growth over the prior two years. Other independent and control variables are defined the same as in the previous subsection. We summarize the details of the variable definitions in the Appendix. In E.g. (6), the coefficient of Vega (γ3) represents the effect of vega compensation on future profitability, and the coefficient of Vega×Cashrich (γ6) indicates whether the effect of vega compensation on profitability differs between cash-rich firms and non-cashrich firms. Next, the coefficient of Vega×Cashrich×MA (γ8) indicates whether managers encouraged by ESOs and excess cash holdings to undertake M&A decisions can create better performance than those not conducting M&A decisions. As we hypothesized, if cash-rich firms undertaking ESOs-induced M&As is more associated with precautionary motives than with agency incentive, the coefficient of Vega×Cashrich×MA (γ8) should be positive. 3.4 Descriptive Statistics Table 1 shows the descriptive statistics for all variables. The average values of Vega and Delta are 0.1031 and 0.4479, respectively. On average, almost 42% of our sample firms held excess cash assets, echoing the increasing trend of firms grasping cash assets (Bates et al., 2009). The mean values of Sales, and EBITDA/TA are higher in our sample than in the sample used in Harford and Uysal (2014) because S&P 1500 firms are larger and more valuable. In addition, 13.95% of the sample firms engage in M&A activities. Within the acquirer sample, the mean CAR (-2,+2) is positive, consistent with Harford and Uysal (2014).
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