Preference dynamics and risk-taking incentives

• 成果类型: Article
• 署名作者: Cen, Xiao; Li, Nan; Tang, Chao; Wang, Juanting
• 署名单位: Texas A&M University System; Texas A&M University College Station; University of Minnesota System; University of Minnesota Twin Cities; Hong Kong University of Science & Technology; Shanghai University of Finance & Economics
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2024.101739
• 发表日期: 2025
• 关键词: payout policy evidence; empirical-evidence; capital structure; ceo compensation; equity; INVESTMENT; FIRMS; debt; determinants; CONTRACTS

摘要

This study explores the relationship between executive compensation and the preference dynamics of managers and shareholders. Our analysis centers on the theoretical prediction that changes in firms' asset value can differentially affect the risk-taking preferences of the two groups, potentially influencing the optimal compensation policy. Utilizing local real estate price changes to identify variations in firms' asset value, we find that a decrease in asset value leads to more risk-taking incentives in compensation, and this effect is more pronounced in firms that are more likely to be influenced by the hypothesized mechanisms. In the second empirical setting, we provide corroborating evidence using a natural experiment involving disaster-induced negative shocks to the firm fundamentals. Collectively, our findings suggest that the design of compensation contracts facilitates incentive alignment by incorporating the dynamic preferences of the contracting parties.