“…We also examine other factors that influence managerial risk‐taking behavior by including CEO compensation characteristics, firm characteristics, and firm governance characteristics as explanatory variables. Similar to the literature (Coles, Daniel, and Naveen, ; Milidonis and Stathopoulos, ), we use the lagged values of our main explanatory variables as a first step to address some of the potential causality concerns. To test our hypothesis, the primary regression model is specified as follows: …”