Managerial Risk-Taking Incentives and Executive Stock Option Repricing: A Study of Us Casino Executives

46 Pages Posted: 18 Mar 2002

See all articles by Daniel A. Rogers

Daniel A. Rogers

Portland State University - School of Business Administration

Date Written: July 2004

Abstract

In this study, I examine the relation between managerial incentives from holdings of company stock and options and stock option repricing. Specifically, given that options provide both incentives to increase risk as well as stock price, firms must be cognizant that executives may increasingly face incentives to invest in risky, negative NPV projects, as options go underwater. Repricing may serve as a mechanism to alleviate such incentives. The study examines repricing activity by firms in the U.S. gaming industry during 1993-1998. I find that, in both firm-level and executive-level analyses, risk-taking incentives from options are positively related to the incidence of executive option repricing. The results are supportive of the hypothesis that repricing assists firms in alleviating excessive risk-taking incentives of senior management.

Keywords: Executive stock options, Repricing, Managerial incentives, Gaming industry

JEL Classification: G13, G34, J33, L83

Suggested Citation

Rogers, Daniel A., Managerial Risk-Taking Incentives and Executive Stock Option Repricing: A Study of Us Casino Executives (July 2004). Available at SSRN: https://ssrn.com/abstract=303781 or http://dx.doi.org/10.2139/ssrn.303781

Daniel A. Rogers (Contact Author)

Portland State University - School of Business Administration ( email )

P.O. Box 751
Portland, OR 97207-0751
United States
503-725-3790 (Phone)
503-725-5850 (Fax)

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