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

Financial Management, Vol. 34, Spring 2005

Posted: 9 Feb 2005

See all articles by Daniel A. Rogers

Daniel A. Rogers

Portland State University - School of Business Administration

Abstract

I examine the relation between managerial incentives from holdings of company stock and options and stock option repricing. Because options provide incentives to increase both risk and stock price, firms must realize that as options go underwater, executives might face incentives to invest in risky, negative NPV projects. Repricing may alleviate such incentives. I examine repricing activity by firms in the U.S. gaming industry and find that risk-taking incentives from options are positively related to the incidence of executive option repricing. The results support 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 U.S. Casino Executives. Financial Management, Vol. 34, Spring 2005, Available at SSRN: https://ssrn.com/abstract=664062

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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