Managerial incentives and risk-taking☆

Coles, Jeffrey L.; Daniel, Naveen D.; Naveen, Lalitha

doi:10.1016/j.jfineco.2004.09.004

Cited by 2,456 publications

(2,372 citation statements)

References 78 publications

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“…shareholders in corporate risk taking has received only limited attention in the empirical literature, unlike managerial ownership (Denis et al (1997)), CEO pay-performance sensitivity (Coles et al (2006)) and legal protection of investors (John et al (2008)). …”

Section: Introductionmentioning

confidence: 99%

Corporate Risk-Taking and Ownership Structure

Paligorova

2009

SSRN Journal

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Section: Introductionmentioning

confidence: 99%

Corporate Risk-Taking and Ownership Structure

Paligorova

2009

SSRN Journal

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“…For example, some researchers choose the acquisition propensity as the proxy of risk-taking behavior [7,26]. R&D expenditure is also a common proxy as the measurement of corporate risk-taking [8,27]. In addition, Li & Tang (2010) and Greve (2003) utilize the activity of launching innovative products as the risk-taking proxy and predict the impact of CEO hubris on firm risk taking in the context of China [2,28].…”

Section: Prior Literature Corporate Risk-taking Measurementmentioning

confidence: 99%

Management Characteristics and Corporate Risk-taking: An Overall Review

Su¹,

Li²,

Wang³

2017

dteees

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Abstract. We review the literature on the relationships between management characteristics and corporate risk-taking over the period 1985~2015 and find that the two types of management characteristics: the physical characteristics and the psychological ones lead to different risk-taking behavior and firm outcomes. Generally, the physical traits have impact on taking risk by psychological bias and the psychological traits affect risk-taking behavior directly. We also find that the researchers always use the traits of CEO or top management as the proxies to explain management behaviors.

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“…Following Guay (1999) and Guay (1999, 2002), we use the sensitivity of CEO's stock and option values to changes in stock price (delta) and the sensitivity of CEO's stock and option values to changes in stock return volatility (vega) as measures for incentives provided by managerial compensation and ownership. Based on these measures, Coles, Daniel and Naveen (2006) find that higher vega leads to more risk-taking activities by management, such as lower investment in property, plant, and equipment, higher book leverage, and market leverage. In contrast, higher delta leads to less risky financial policies such as a decrease in leverage and an increase in capital expenditures.…”

Section: Data Descriptionmentioning

confidence: 99%

Negative Hedging: Performance-Sensitive Debt and CEOs’ Equity Incentives

Tchistyi¹,

Yermack²,

Yun³

2011

J. Financ. Quant. Anal.

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We examine the relation between CEOs' equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distress while also making a firm riskier to the benefit of option holders. We find that managers whose compensation is more sensitive to stock price volatility choose steeper and more convex performance pricing schedules, while those with high delta incentives choose flatter, less convex pricing schedules. Performance pricing contracts therefore seem to provide a channel for managers to increase firms' financial risk to gain private benefits. JEL classifications: G30; G34

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Managerial incentives and risk-taking☆

Cited by 2,456 publications

References 78 publications

Corporate Risk-Taking and Ownership Structure

Corporate Risk-Taking and Ownership Structure

Management Characteristics and Corporate Risk-taking: An Overall Review

Negative Hedging: Performance-Sensitive Debt and CEOs’ Equity Incentives

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