CEO Risk Taking Equity Incentives and Workplace Misconduct
61 Pages Posted: 16 Jan 2020 Last revised: 10 Apr 2020
Date Written: December 30, 2019
We examine the relation between CEO risk taking equity incentives, as captured by CEO vega, and workplace misconduct. Workplace misconduct includes health and safety violations, non-compliance with labor laws, and other violations broadly related to labor exploitation. Using regression analysis, matched sample tests, and a quasi-natural experiment we find a positive relation between CEO vega and workplace misconduct. We identify a reduction in discretionary expenses and increased pressure on employees to perform as potential channels through which CEO vega affects workplace misconduct. Finally, we find evidence that the negative consequences of workplace misconduct are outweighed by increased earnings. These results suggest that CEO risk taking equity incentives not only influence investment and financial decision making, but also affect operational decision making.
Keywords: Workplace Misconduct, Executive Compensation, Risk taking Equity Incentives
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation