Differential Risk Taking Implications of Performance Incentives from Stock and Stock Option Holdings

2016 ◽  
Author(s):  
Tanseli Savaser ◽  
Elif Sisli Ciamarra
Keyword(s):  
Risk Taking ◽  
Stock Option ◽  
Performance Incentives ◽  
Differential Risk

DIFFERENTIAL RISK‐TAKING IMPLICATIONS OF PERFORMANCE INCENTIVES FROM STOCK AND STOCK OPTION HOLDINGS

2019 ◽  
Vol 42 (3) ◽  
pp. 609-636
Author(s):  
Tanseli Savaşer ◽  
Elif Şişli‐Ciamarra
Keyword(s):  
Risk Taking ◽  
Stock Option ◽  
Performance Incentives ◽  
Differential Risk

Managerial Equity Holdings and Income Smoothing Incentives

2017 ◽  
Vol 31 (1) ◽  
pp. 195-218 ◽  
Author(s):  
Sydney Qing Shu ◽  
Wayne B. Thomas
Keyword(s):  
Risk Taking ◽  
Agency Problems ◽  
Discretionary Accruals ◽  
Stock Option ◽  
Income Smoothing ◽  
Future Earnings ◽  
Future Performance ◽  
Excessive Risk Taking ◽  
Excessive Risk ◽  
Equity Holdings

ABSTRACT We explore how managerial stock holdings and option holdings affect CEOs' income smoothing incentives. Given the different roles of stock holdings and option holdings in solving agency problems, managers may smooth past earnings using discretionary accruals for the purpose of revealing information to help investors better predict future earnings or for the purpose of hiding volatility of past earnings. We find the association between past smoothing and predictability of future earnings is increasing (decreasing) in CEO stock (option) holdings. Results are consistent with stock holdings aligning the interests of managers and shareholders, and managers using discretionary accruals to smooth past earnings to reveal information to investors about future performance. In contrast, option holdings have been linked with excessive risk taking by managers, and managers use discretionary accruals to mask volatility of less predictable earnings. We demonstrate that income smoothing can be informative or opportunistic, depending on the incentives of CEOs.

Does Greater Risk-Bearing in Stock Option Compensation Reduce the Influence of Problem Framing On Managerial Risk-Taking Behavior?

2011 ◽  
Vol 23 (1) ◽  
pp. 185-201 ◽  
Author(s):  
Kimberly Sawers ◽  
Arnold Wright ◽  
Valentina Zamora
Keyword(s):  
Risk Taking ◽  
Stock Options ◽  
Stock Option ◽  
Money Stock ◽  
Agency Model ◽  
Problem Framing ◽  
Managerial Risk ◽  
Option Compensation ◽  
Behavioral Agency ◽  
Stock Option Compensation

ABSTRACT: We examine the extent to which the behavioral agency model reflects the relation between greater risk-bearing in stock option compensation and managerial risk-taking. The behavioral agency model predicts that managers with greater wealth at stake will avoid risky projects that threaten their wealth. This greater risk-bearing effect moderates the problem-framing effect, which predicts that loss-averse managers will be more (less) risk-taking when choosing among loss (gain) projects. Using a 2 × 2 between-subjects experiment with 108 M.B.A. students acting as managers, we find that managers are more risk-taking in the loss context than in the gain context when they have at-the-money stock options but not when they have wealth at stake through in-the-money stock options. Further, we find that managers with in-the-money stock options are less risk-taking than managers with at-the-money stock options in the loss context. These findings support the behavioral agency model prediction that greater risk-bearing in stock option compensation (moving from at-the-money stock options to in-the-money stock options) reduces the problem framing effect on risk-taking behavior, particularly when the firm faces a loss decision context. Our results point to the importance of considering the implications of risk-bearing in stock option compensation for managers choosing risky projects that affect firm value.

scholarly journals The impact of managerial stock option on firm risk taking: evidence from China

Pressacademia ◽  
2019 ◽  
Vol 8 (2) ◽  
pp. 101-113
Author(s):  
Ratny Seng ◽  
Kimly Heng ◽  
Gao-Liang Tian ◽  
Mohammad Arshad Arif ◽  
Hua Feng
Keyword(s):  
Risk Taking ◽  
Stock Option ◽  
Firm Risk ◽  
The Impact

Does stock option-based executive compensation induce risk-taking? An analysis of the banking industry

2006 ◽  
Vol 30 (3) ◽  
pp. 915-945 ◽  
Author(s):  
Carl R. Chen ◽  
Thomas L. Steiner ◽  
Ann Marie Whyte
Keyword(s):  
Executive Compensation ◽  
Risk Taking ◽  
Banking Industry ◽  
Stock Option

How to strike a balance between CEO compensation and strategic risk? A longitudinal analysis

2018 ◽  
Vol 11 (3) ◽  
pp. 387-417 ◽  
Author(s):  
Bradley Olson ◽  
Satyanarayana Parayitam ◽  
Bradley Skousen ◽  
Christopher Skousen
Keyword(s):  
Risk Taking ◽  
Ceo Compensation ◽  
Stock Option ◽  
Ceo Power ◽  
Content Type ◽  
Publicly Traded Companies ◽  
Strategic Risk ◽  
Ceo Tenure ◽  
Increase Risk ◽  
Longitudinal Regression

Purpose The purpose of this paper is to examine the relationships between CEO ownership, stock option compensation, and risk taking. The authors include important CEO power variables as moderators. Design/methodology/approach The paper uses a longitudinal regression analysis. In addition, the paper includes interactional plots for further interpretation. Findings The results indicate that CEO ownership reduces risk taking, while there is a partial support that stock options increase risk taking. CEO tenure is a powerful moderator that decreases risk taking in both CEO ownership and CEO stock option scenarios. Board independence, counter to the hypothesis in this paper, may encourage risk taking. Research limitations/implications The findings in this paper provide support for the inclusion of CEO power variables in CEO compensation studies. However, the study examines large publicly traded companies; thus, all findings may not be applicable to small- and medium-sized companies. Originality/value Scholars have encouraged more complex CEO compensation models and the authors have examined both main effect and interaction models.

The Effect of Stock Option Backdating on CEO Risk Taking

2014 ◽  
Vol 2014 (1) ◽  
pp. 12734
Author(s):  
Jing Jin ◽  
Yan Anthea Zhang ◽  
Robert E. Hoskisson
Keyword(s):  
Risk Taking ◽  
Stock Option
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