This research intends to explore the factor determining the positive relation between executive stock options and managerial risk taking. I firstly investigate the relation between the risk increase of investment project (referred to the risk relative) and a measure of incentive effects of stock options (referred to as the incentive ratio). The evidence shows a positive relation between the ris...

The literature on relational incentive contracts suggests that rms may be able to condition payments to employees on information that is not available to those outside the rm. Given this, market participants may use the magnitude of such payments to infer the non-public information, which then may give rms a reason to choose wage payments strategically. We combine the literatures on relational ...

The common folklore that giving options to agents will make them more willing to take risks is false. In fact, no incentive schedule will make all expected utility maximizers more or less risk averse. This paper finds simple, intuitive, necessary and sufficient conditions under which incentive schedules make agents more or less risk averse. The paper uses these to examine the incentive effects ...

The purpose of this study was to examine the role technological intensity in the choice of compensation policies, and the influence of such policies on market performance and turnover in high and low technological intensity firms. Using a survey of 252 Canadian firms, we show technology intensity has significant influence on compensation policies. A second survey of 128 Canadian organizations s...

Provider organizations that have experience in implementing value-based physician compensation can recommend the following best practices, among others: Clearly link changes in physician compensation to the broader strategic and financial objectives of the organization. Focus financial incentives on evidence-based measures that physicians find credible and achievable. Make sure everyone underst...

We study the effect of a firm's acquisitions on the subsequent career of its chief executive officer (CEO) by examining a sample of executives who undertook large acquisitions between 1986 and 1988. We find that acquirers do not have significantly different compensation growth from executives who did not undertake acquisitions. Further, we find the effect of acquisitions on compensation does no...

Allowing CEOs to hedge the risk in the compensation contracts their …rms give them has been controversial because such hedging permits the executives to undo some of the incentive e¤ects of those contracts; it also results in a divergence between the compensation …rms pay their senior executives and the compensation those executives e¤ectively receive. We analyze the personal hedging activities...