https://scholars.lib.ntu.edu.tw/handle/123456789/629887
標題: | Option implied riskiness and risk-taking incentives of executive compensation | 作者: | Lu, Chia-Chi Shen, Carl Hsin-han PAI-TA SHIH Tsai, Wei-Che |
關鍵字: | ESOs | Option implied riskiness | Risk-taking incentives | Stochastic dominance | 公開日期: | 1-一月-2022 | 出版社: | Springer | 卷: | 60 | 期: | 3 | 來源出版物: | Review of Quantitative Finance and Accounting | 摘要: | The riskiness developed by Aumann and Serrano (J Polit Econ 116:810–836, 2008) is a measure based on mean, standard deviation and higher order moments. Instead of relying on corporate policies as indirect measures of firm risk, we theoretically show a positive relation between the value of compensation contracts with convex payoff and the firm’s option implied riskiness through second-order stochastic dominance and provide supportive empirical evidence of this risk taking incentive. To address the endogeneity concern, we perform a difference-in-difference analysis using the implementation of FAS 123R in 2006, an accounting standard under which firms are required to recognize the fair value-based expense of stock option grants. Firms thereby are discouraged from granting executive stock options (ESO) because of the higher cost resulted from the strict expense recognition required by FAS 123R. Hence, the implementation of FAS 123R results in an exogenous negative shock to the use of ESO. Using this approach, we find a significant decrease in the option implied riskiness subsequent to FAS 123R, supportive of the risk-taking incentive associated with executive stock options. |
URI: | https://scholars.lib.ntu.edu.tw/handle/123456789/629887 | ISSN: | 0924865X | DOI: | 10.1007/s11156-022-01123-2 |
顯示於: | 財務金融學系 |
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