Equity pay has been the primary component of managerial compensation packages at US public firms since the early 1990s. Using a comprehensive sample of top executives from 1992-2020, we estimate to what extent they trade firm equity held in their portfolios to neutralize increments in ownership...

We provide evidence that CEO equity incentives, especially stock options, influence stock liquidity risk via information disclosure quality. We document a negative association between CEO options and the quality of future managerial disclosure policy. Contributing to the literature on CEO...

We address two apparent paradoxes of risk management: (1) managers hedge in order to avoid negative earnings surprises, yet they tend to hedge risks uninformative of the value of the company; and (2) the presence of options in managers' compensation distorts their incentive to hedge, inducing...

We develop a continuous-time model where a risk-neutral principal contracts with a CARA manager protected by limited liability to run a project. Its output can be increased by costly unobservable managerial effort, but it is liquidated if the manager quits. The manager can trade a market...

This paper examines how a tournament among CEOs to progress within the CEO labor market changes their tendency toward corporate hedging policies. We exploit the textual analysis of 10-Ks to generate corporate hedging proxies. We find that the likelihood and intensity to hedge increases as the...

This paper studies how private information in hedging outcomes affects the design of managerial compensation when hedging instruments serve as a double-edged sword in that they may be used for both corporate hedging and earnings management. On the one hand, financial vehicles can offer...

This paper studies how private information in hedging outcomes affects the design of managerial compensation when hedging instruments serve as a double-edged sword in that they may be used for both corporate hedging and earnings management. On the one hand, financial vehicles can offer...