The paper investigates the role of CEO's equity and risk incentives in boosting securitization in the financial industry and in motivating executives to reduce the perceived risk while betting on it. Using a sample of US financial institutions over the period 2003-2009 we document that CEOs with...

We measure a manager's risk-taking incentives as the total sensitivity of the manager's debt, stock, and option holdings to firm volatility. We compare this measure to the option vega and to relative measures used by the prior literature. Vega does not capture risk-taking incentives from...

This paper studies dynamic compensation and risk management under cash flow volatility shocks. The optimal contract depends critically on firms' ability to make good on promised future payments to managers. When volatility is low, firms with full commitment ability implement high pay-performance...

The paper investigates the role of CEO risk incentives in increasing the riskiness of securitization transactions in the financial industry. Using a sample of US financial institutions, and a system model to account for the endogeneity problem between risk incentives and securitization, we...

Does personal litigation risk for independent directors materially affect firm valuation, compensation-related issues for independent directors, and board composition decisions? We use the unexpected In re Investors Bancorp decision in 2017 by the Delaware Supreme Court, which lowered the...

Using a news-based index of aggregate policy uncertainty in the US economy, we document a strong negative relation between policy uncertainty and corporate risk-taking. We show that high levels of policy uncertainty are associated with significantly lower future stock return volatility at the...

After decades of declining litigation risk, independent directors of public companies are viewed as effectively immune to personal litigation costs. However, the unexpected In re Investors Bancorp decision by the Delaware Supreme Court in 2017 lowered the liability threshold only for directors...

Different U.S. state governments have begun to adopt climate adaptation strategies and action plans to prepare for and combat the significant threat of climate change. The finalization of these strategies and action plans results in a state-level climate adaptation plan—the SCAP. We find that...

We analyze the effects of CEOs' layoff risk on their risk choice while overseeing a firm. A CEO, whose managerial ability is unknown, is fired if her expected ability is below average. Her risk choice changes the informativeness of output and market's belief about her ability. She can decrease...

We develop a dynamic model of banking to assess the effects of liquidity and leverage requirements on banks' insolvency risk. In this model, banks face taxation, flotation costs of securities, and default costs and maximize shareholder value by making their financing, liquid asset holdings, and...