Managerial incentives and risk-taking

被引:1593
作者
Coles, JL
Daniel, ND
Naveen, L
机构
[1] Arizona State Univ, WP Carey Sch Business, Tempe, AZ 85287 USA
[2] Georgia State Univ, Robinson Coll Business, Atlanta, GA 30303 USA
关键词
executive compensation; managerial incentives; risk taking; investment policy; financing policy;
D O I
10.1016/j.jfineco.2004.09.004
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We provide empirical evidence of a strong causal relation between managerial compensation and investment policy, debt policy, and firm risk. Controlling for CEO pay-performance sensitivity (delta) and the feedback effects of firm policy and risk on the managerial compensation scheme, we find that higher sensitivity of CEO wealth to stock volatility (vega) implements riskier policy choices, including relatively more investment in R&D, less investment in PPE, more focus, and higher leverage. We also find that riskier policy choices generally lead to compensation structures with higher vega and lower delta. Stock-return volatility has a positive effect on both vega and delta. (c) 2005 Elsevier B.V. All rights reserved.
引用
收藏
页码:431 / 468
页数:38
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