Journal article
Managerial incentives and risk-taking
Journal of financial economics, v 79(2), pp 431-468
01 Feb 2006
Abstract
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.
Metrics
Details
- Title
- Managerial incentives and risk-taking
- Creators
- Jeffrey L. Coles - Arizona State UniversityNaveen D. Daniel - Georgia State UniversityLalitha Naveen - Georgia State University
- Publication Details
- Journal of financial economics, v 79(2), pp 431-468
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Web of Science ID
- WOS:000235329200008
- Scopus ID
- 2-s2.0-30744467191
- Other Identifier
- 991020537627904721
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Business, Finance
- Economics