On managerial risk-taking incentives when compensation may be hedged against

On managerial risk - taking incentives when compensation may be hedged against

We consider a continuous time principal-agent model where the agent (the manager) can choose the output’s exposure to risk and the output’s expected return of the principal (the firm). Both the firm and the manager have exponential utility and can trade in a frictionless market. When the firm observes the manager’s choice of effort and volatility, there is an optimal contract that induces the m...

Impact of compensation structure and managerial incentives on bank risk taking

In this article, we analyze the impact of managerial compensation structure in publicly-traded banks on their risk taking behavior described by the loans extended by them, and the changes in risk taking through the changing regulatory environment for these banks. We build a simulation model to study the impact of the interaction between regulatory changes and competitiveness in the sector on ma...

Appendix for “ Managerial risk - taking incentives and corporate pension policy ”

Managerial Risk-Taking Behavior and Equity-Based Compensation

I study managers' risk-taking behavior and how it is affected by equity-based compensation. I find that in response to an exogenous increase in takeover protection in Delaware during the mid-1990s, managers lower firm risk by 5%. I also find that the decrease in firm risk is concentrated among firms with low managerial equity-based incentives. In particular, firms with low CEO portfolio sensiti...

CEO Risk-Taking Incentives based on Environmental Sustainability

In this study, I try to examine the effect of environmental sustainability on CEO risk taking. Prior research, however, has struggled to establish this relation empirically; moreover, some evidence points to the possibility that the CEO risk appetite is lower for firms with sustainable environment. The opportunistic approach of managers leads to decisions about personal interests and imposing c...