Equity Incentives, Disclosure Quality, and Stock Liquidity Risk

Charles A. Dice Center Working Paper No. 2017-02

Fisher College of Business Working Paper No. 2017-03-002

64 Pages Posted: 25 Jan 2017 Last revised: 1 Mar 2017

See all articles by Karen H. Wruck

Karen H. Wruck

Ohio State University - Fisher College of Business, Department of Finance

YiLin Wu

National Taiwan University - Department of Economics

Date Written: February 27, 2017

Abstract

We provide evidence that CEO equity incentives, especially stock options, influence stock liquidity risk via information disclosure quality. We document a negative association between CEO options and the quality of future managerial disclosure policy. Contributing to the literature on CEO risk-taking, we document a positive association between CEO options and future systematic stock liquidity risk. Controlling for endogeneity, we show that information disclosure quality is an important channel through which CEO options influence stock liquidity risk. Results are robust to various controls for endogeneity and to the use of numerous disclosure quality and stock liquidity risk measures.

Keywords: CEO Compensation, CEO Incentives, CEO Stock Options, Liquidity Risk, Liquidity Beta, Liquidity Commonality, Systematic Liquidity Risk, Idiosyncratic Risk, Risk-Taking Incentives, Hedging, Managerial Risk-Taking Incentives, Managerial Hedging

JEL Classification: D22, G12, G32, G34, J33, J41, O31

Suggested Citation

Wruck, Karen H. and Wu, YiLin, Equity Incentives, Disclosure Quality, and Stock Liquidity Risk (February 27, 2017). Charles A. Dice Center Working Paper No. 2017-02; Fisher College of Business Working Paper No. 2017-03-002. Available at SSRN: https://ssrn.com/abstract=2905243 or http://dx.doi.org/10.2139/ssrn.2905243

Karen H. Wruck (Contact Author)

Ohio State University - Fisher College of Business, Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-4330 (Phone)
614-292-2418 (Fax)

HOME PAGE: http://https://fisher.osu.edu/people/wruck.1

YiLin Wu

National Taiwan University - Department of Economics ( email )

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Register to save articles to
your library

Register

Paper statistics

Downloads
353
Abstract Views
1,432
rank
85,592
PlumX Metrics