The DOI matches its Crossref record; 3 of the 3 references it cites were found in a registry or an index.
Investment, Idiosyncratic Risk, and Ownership
Abstract
High‐powered incentives may induce higher managerial effort, but they also expose managers to idiosyncratic risk. If managers are risk averse, they might underinvest when firm‐specific uncertainty increases, leading to suboptimal investment decisions from the perspective of well‐diversified shareholders. We empirically document that, when idiosyncratic risk rises, firm investment falls, and more so when managers own a larger fraction of the firm. This negative effect of managerial risk aversion on investment is mitigated if executives are compensated with options rather than with shares or if institutional investors form a large part of the shareholder base.
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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
Determinants of corporate borrowing
Myers, S. C. (1977) · Journal of Financial Economics · doi:10.1016/0304-405x(77)90015-0 · Cited by 13,169
Financing Constraints and Corporate Investment
Fazzari, S. M., Hubbard, R. G., Petersen, B. C., Blinder, A. S., & Poterba, J. M. (1988) · Brookings Papers on Economic Activity · doi:10.2307/2534426 · Cited by 5,574
Cited by
Measuring Economic Policy Uncertainty*
Baker, S. R., Bloom, N., & Davis, S. J. (2016) · The Quarterly Journal of Economics · doi:10.1093/qje/qjw024 · Cited by 12,458
Really Uncertain Business Cycles
Bloom, N., Floetotto, M., Jaimovich, N., Saporta-Eksten, I., & Terry, S. J. (2018) · Econometrica · doi:10.3982/ecta10927 · Cited by 1,120
Uncertainty and Economic Activity: Evidence from Business Survey Data
Bachmann, R., Elstner, S., & Sims, E. R. (2013) · American Economic Journal: Macroeconomics · doi:10.1257/mac.5.2.217 · Cited by 991
Growing out of trouble? Corporate responses to liability risk
Gormley, T. A., & Matsa, D. A. (2011) · Review of Financial Studies · doi:10.1093/rfs/hhr011 · Cited by 690
Dynamic Agency and the q Theory of Investment
DEMARZO, P. M., FISHMAN, M. J., HE, Z., & WANG, N. (2012) · The Journal of Finance · doi:10.1111/j.1540-6261.2012.01787.x · Cited by 325
Metadata
- Authors
- PANOUSI, V., & PAPANIKOLAOU, D.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 2012-05-21
- Volume
- 67
- Issue
- 3
- Pages
- 1113-1148
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2099378469
- Cited by
- 652
- References
- 3
- FWCI
- 104.90
- Type
- journal article
- Language
- en
- Open access
- closed
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- PANOUSI, V., & PAPANIKOLAOU, D. (2012). Investment, Idiosyncratic Risk, and Ownership. The Journal of Finance. https://doi.org/10.1111/j.1540-6261.2012.01743.x
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