The DOI matches its Crossref record; 5 of the 5 references it cites were found in a registry or an index.
Executive stock options, differential risk-taking incentives, and firm value
Open accessAbstract
The sensitivity of stock options' payoff to return volatility, or vega, provides risk-averse CEOs with an incentive to increase their firms' risk more by increasing systematic rather than idiosyncratic risk. This effect manifests because any increase in the firm's systematic risk can be hedged by a CEO who can trade the market portfolio. Consistent with this prediction, we find that vega gives CEOs incentives to increase their firms' total risk by increasing systematic risk but not idiosyncratic risk. Collectively, our results suggest that stock options might not always encourage managers to pursue projects that are primarily characterized by idiosyncratic risk when projects with systematic risk are available as an alternative.
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Cites
Common risk factors in the returns on stocks and bonds
Fama, E. F., & French, K. R. (1993) · Journal of Financial Economics · doi:10.1016/0304-405x(93)90023-5 · Cited by 25,754
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Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have
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Knyazeva, A., Knyazeva, D., & Masulis, R. W. (2013) · Review of Financial Studies · doi:10.1093/rfs/hht020 · Cited by 678
Is working capital management value-enhancing? Evidence from firm performance and investments
Aktas, N., Croci, E., & Petmezas, D. (2015) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2014.12.008 · Cited by 534
What's in an education? Implications of CEO education for bank performance
King, T., Srivastav, A., & Williams, J. (2016) · Journal of Corporate Finance · doi:10.1016/j.jcorpfin.2016.01.003 · Cited by 329
Corporate Governance, Incentives, and Tax Avoidance
Armstrong, C. S., Blouin, J. L., Jagolinzer, A. D., & Larcker, D. F. (2013) · SSRN Electronic Journal · doi:10.2139/ssrn.2252682 · Cited by 288
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Metadata
- Authors
- Armstrong, C. S., & Vashishtha, R.
- Venue
- Journal of Financial Economics
- Publisher
- Elsevier BV
- Published
- 2012-04
- Volume
- 104
- Issue
- 1
- Pages
- 70-88
- ISSN
- 0304-405X (ISSN-L)
- OpenAlex
- W2069763909
- Cited by
- 463
- References
- 5
- FWCI
- 61.78
- Type
- journal article
- Language
- en
- Open access
- green
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Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
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