Idiosyncratic risk and the manager

• 成果类型: Article
• 署名作者: Glover, Brent; Levine, Oliver
• 署名单位: Carnegie Mellon University; University of Wisconsin System; University of Wisconsin Madison
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2017.07.003
• 发表日期: 2017
• 页码: 320-341
• 关键词: Corporate investment; Executive compensation; managerial incentives; Agency conflicts; risk taking

摘要

We develop a model to characterize and quantify the effects of stock, option, and fixed compensation on a manager's risk-taking incentive and investment choice. We find the average chief executive officer's (CEO) compensation contract incentivizes overinvestment by 1.3 percentage points per year, with significant variation across firms and over time. We estimate a value of CEO effort implied by compensation contracts and find it to be strongly related to firm intangibility. Finally, we assess the effects on investment of FAS 123R and a hypothetical ban on option grants and find heterogeneous responses that depend on firm volatility and the prior structure of compensation. (C) 2017 Elsevier B.V. All rights reserved.