We examine the influence of CEO equity-based compensation on strategic risk taking by the firm. Building off the Behavioral Agency Model, Agency Theory, and Prospect Theory, we develop arguments about when equity-based compensation elements will increase or decrease executive risk propensity and, in turn, strategic risk taking. Incorporating a behavioral perspective into our models of incentive...

We analyze several proposals to restrict CEO compensation and calibrate two models of executive compensation that describe how rms would react to dierent types of restrictions. We nd that many restrictions would have unintended consequences. Restrictions on total realized (ex-post) payouts lead to higher average compensation, higher rewards for mediocre performance, lower risk-taking incentives...

This paper investigates the impact of environmental, social and governance (ESG) disclosure on corporate risk-taking how this is further affected by chief executive officer (CEO) power incentives within US companies. We find that ESG decreases based both accounting-based market-based returns. Further, we more effective in mitigating than a firm with powerful CEO. In contrast, CEO's ESG-incentiv...

Motivated by concerns that stock-based compensation might lead to excessive risk-taking, this paper examines the relations between CEO incentives and the cost of debt. Unlike prior research, this paper uses the sensitivities of CEO stock and option portfolios to stock price (delta) and stock return volatility (vega) to measure CEO incentives. Higher delta (vega) is predicted to be related to le...

The psychological factors of senior executives have an important impact on the firm’s financial policies. In this paper, we investigate association between CEO risk-taking entrepreneurial spirit and firm cash holdings, find that firms with higher less holdings. Further, financing constraints can mitigate negative whereas needs enhances them. Mechanism test illustrates affects holdings through c...