Journal of Corporate Finance Vol. 32 2015
Do risk-taking incentives induce CEOs to invest? Evidence from acquisitions
Abstract
This paper examines the effect of risk-taking incentives on acquisition investments. We find that CEOs with risk-taking incentives are more likely to invest in acquisitions. Economically, an inter-quartile range increase in vega translates into an approximately 4.22% enhancement in acquisition investments, consistent with the theory that risk-taking incentives induce CEOs to undertake investments. Importantly, the positive relation between vega and acquisitions is confined only to non-overconfident CEO subgroup. Further, corporate governance does not generally affect the association between vega and acquisition investments. Finally, vega is positively related to bidder announcement returns.
- DOI
- 10.1016/j.jcorpfin.2015.03.001
- Volume
- 32
- Pages
- 1-23
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib