Abstract

http://ssrn.com/abstract=2207026
 
 

References (31)



 
 

Citations (1)



 
 

Footnotes (4)



 


 



How Do Quasi-Random Option Grants Affect CEO Risk-Taking?


Kelly Shue


University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Richard R. Townsend


Tuck School of Business at Dartmouth

June 28, 2016

Chicago Booth Research Paper No. 13-03
Fama-Miller Working Paper

Abstract:     
We examine how an increase in stock option grants affects CEO risk-taking. The overall net effect of option grants is theoretically ambiguous for risk-averse CEOs. To overcome the endogeneity of option grants, we exploit institutional features of multi- year compensation plans, which generate two distinct types of variation in the timing of when large increases in new at-the-money options are granted. We find that, given average grant levels during our sample period, a 10 percent increase in new options granted leads to a 2.8–4.2 percent increase in equity volatility. This increase in risk is driven largely by increased leverage.

Number of Pages in PDF File: 56

Keywords: Executive compensation, Incentives, Risk-taking, Pay-for-performance

JEL Classification: M52, J33, G32, G34


Open PDF in Browser Download This Paper

Date posted: February 6, 2013 ; Last revised: July 21, 2016

Suggested Citation

Shue, Kelly and Townsend, Richard R., How Do Quasi-Random Option Grants Affect CEO Risk-Taking? (June 28, 2016). Chicago Booth Research Paper No. 13-03; Fama-Miller Working Paper. Available at SSRN: http://ssrn.com/abstract=2207026 or http://dx.doi.org/10.2139/ssrn.2207026

Contact Information

Kelly Shue (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S Woodlawn Avenue
Chicago, IL 60637
United States
HOME PAGE: http://https://sites.google.com/site/kellyshue/

Chicago Booth School of Business Logo

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Richard R. Townsend
Tuck School of Business at Dartmouth ( email )
Hanover, NH 03755
United States
Feedback to SSRN


Paper statistics
Abstract Views: 3,729
Downloads: 1,036
Download Rank: 14,221
References:  31
Citations:  1
Footnotes:  4

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.250 seconds