Journal of Financial Economics Vol. 92 No. 3 2009
Managerial risk-taking behavior and equity-based compensation☆
Abstract
Equity-based compensation affects managers’ risk-taking behavior, which in turn has an impact on shareholder wealth. In response to an exogenous increase in takeover protection in Delaware during the mid-1990s, managers lower firm risk by 6%. This risk reduction is concentrated among firms with low managerial equity-based incentives, in particular firms with low chief executive officer portfolio sensitivity to stock return volatility. Furthermore, the risk reduction is value-destroying. Finally, firms respond to the increased protection accorded by the regime shift by providing managers with greater incentives for risk-taking.
- DOI
- 10.1016/j.jfineco.2008.05.004
- Volume
- 92
- Issue
- 3
- Pages
- 470-490
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref