How do we prevent financial institutions from taking excessive risk when the public fisc serves as their ultimate creditor? This is one of the central questions left over after the recent financial crisis and, for the past five years, there has been no shortage of proposed answers. Two of the...

I investigate the consequences of executive stock option (ESO) risk incentives on risk-taking and future stock returns, conditional on past firm performance. Prior research documents a positive relation between compensation convexity (captured by “vega,” the sensitivity of CEO wealth to...

Traditionally, researchers have had difficulty testing the relationship between the degree of risk or uncertainty in workers' environments and incentive pay. The authors employ Prendergast's (2002) theory that incorporates the delegation of worker authority into the principal-agent model to...

This study, through empirical evidence of 3,081 US firms during the period of 1992-2009, shows a strong causal relation between different CEO compensation components and firms' investment policy and firm risk. Specifically, the proportion of CEO option-based compensation is positively and...

Uncertainty has qualitatively different implications than risk in studying executive incentives. We study the interplay between profitability uncertainty and moral hazard, where profitability is multiplicative with the managerial effort. Investors who face greater uncertainty desire faster...

Contrary to the entrenchment view of executive compensation, I find that CEOs with more control over the firm, proxied by higher equity ownership, have smaller compensation packages and are less likely to have severance contracts. Despite lower pay, these CEOs have longer tenure and their...

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...

Influenced by their compensation plans, CEOs make their own luck through decisions that affect future firm risk. After adopting a relative performance evaluation (RPE) plan, total and idiosyncratic risk are higher, and the correlation between firm and industry performance is lower. The opposite...

This paper examines the liquidity, Tobin's Q, and cost of equity effects from voluntary and mandatory IFRS adoption. In contrast to prior work, we focus on the firm level heterogeneity in the economic consequences, recognising that the level of uncertainty avoidance (UAI) in a country will...

We examine how the market values operating assets in the presence of time-varying ex ante risk that these assets may be tunneled away. We analyze pairs of Chinese publicly listed firms and their non-listed parents and examine the market valuation of current assets (cash balances, trade...