|Author:||Xia, Hui Harry|
|Title:||High return, high risk : does stock option based CEO compensation encourage risk taking & its implications after the adoption of FAS 123R|
|Subject:||Hong Kong Polytechnic University -- Dissertations|
Chief executive officers -- Salaries, etc.
|Department:||Graduate School of Business|
|Pages:||v, 107 leaves ; 30 cm.|
|Abstract:||This study, through empirical evidence of 3,081 firms during the period of 1992-2009, show 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 significantly associated with firm's R&D expenditures and firm focus, while the proportion of cash-based and restricted stock compensation are negatively and significantly related. Such results are robust across alternative measures and statistical methodology. Furthermore, I find the non-linear relation between CEO option pay level and R&D investment with practical implications. Finally, following the implementation of FAS 123R in 2005, I provide new evidence that, despite a clear tendency of CEO option pay reduction and replacement with restricted stocks, option-based compensation remains as an effective motivation and even becomes a more efficient incentive for CEO to take risk on R&D investment and firm focus.|
|Rights:||All rights reserved|
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