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http://ssrn.com/abstract=2297996
 
 

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Non-Executive Employee Ownership and Corporate Risk


Francesco Bova


University of Toronto - Rotman School of Management

Kalin S. Kolev


Yale School of Management

Jacob K. Thomas


Yale School of Management

Frank Zhang


Yale School of Management

February 14, 2014

Rotman School of Management Working Paper No. 2297996

Abstract:     
Prior research documents a negative link between risk and executive holding of stock (positive link observed for options). We find a similar negative relation for non-executive holding of stock. Our finding is consistent with the view that non-executives not only face significant incentives to reduce risk when they hold stock, but they are also able to affect firm risk. While endogeneity cannot be fully ruled out, the results of a battery of tests suggest that it plays a limited role. A second robust result is that the documented relation becomes more negative as option-based executive compensation increases. Overall, corporate risk is related to the incentives created by stock and options held by both executives and non-executives, as well as interactions among those incentives.

Number of Pages in PDF File: 52

Keywords: Employee ownership, employee compensation, executive compensation, risk

JEL Classification: G30, M20, M40

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Date posted: July 25, 2013 ; Last revised: June 11, 2014

Suggested Citation

Bova, Francesco and Kolev, Kalin S. and Thomas, Jacob K. and Zhang, Frank, Non-Executive Employee Ownership and Corporate Risk (February 14, 2014). Rotman School of Management Working Paper No. 2297996. Available at SSRN: http://ssrn.com/abstract=2297996 or http://dx.doi.org/10.2139/ssrn.2297996

Contact Information

Francesco Bova (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-978-3985 (Phone)
Kalin S. Kolev
Yale School of Management ( email )
165 Whitney Avenue
New Haven, CT 06511
United States
Jacob Kandathil Thomas
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
Frank Zhang
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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