CEO compensation and corporate risk: Evidence from a natural experiment

• 成果类型: Article
• 署名作者: Gormley, Todd A.; Matsa, David A.; Milbourn, Todd
• 署名单位: University of Pennsylvania; Northwestern University; Washington University (WUSTL)
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2013.08.001
• 发表日期: 2013
• 关键词: STOCK OPTION PORTFOLIOS; managerial incentives; organizational form; taking incentives; Agency problems; OWNERSHIP; determinants; INVESTMENT; management; SENSITIVITIES

摘要

This paper examines the two-way relationship between managerial compensation and corporate risk by exploiting an unanticipated change in firms' business risks. The natural experiment provides an opportunity to examine two classic questions related to incentives and risk-how boards adjust incentives in response to firms' risk and how these incentives affect managers' risk-taking. We find that, after left-tail risk increases, boards reduce managers' exposure to stock price movements and that less convexity from options-based pay leads to greater risk-reducing activities. Specifically, managers with less convex payoffs tend to cut leverage and R&D, stockpile cash, and engage in more diversifying acquisitions. (C) 2013 Elsevier B.V. All rights reserved.