Empirical Evidence on the Relation Between Stock Option Compensation and Risk Taking

By Shivaram Rajgopal, Terry Shevlin. 2002

860 citations recorded by the source corpus.

Subfields: Accounting, Finance, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/5b8eb8d23108562301ead277b70a5e3fd1902477

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Citations in the corpus

Managerial Risk-Taking Incentive and Firm Innovation: Evidence from FAS 123R (2018, neutral): “…leverage ratio, more research and development (R&D) investments, less diversifications, and greater underfunding and risky asset allocation in pension policy (Guay (1999), Rajgopal and Shevlin (2002), Coles, Daniel, and Naveen (2006), Chava and Purnanandam (2010), and Anantharaman and Lee (2014)).”
Ownership as a Form of Corporate Governance (2010, neutral): “For example, the results of some studies show that executive ownership leads to greater risk taking (Rajgopal and Shevlin, 2002) whereas others report the opposite effects (Desai and Dharmapala, 2006).”
Managerial Incentives and Risk-taking (2006, methodology): “these studies measure incentives with delta (e.g., Anderson et al., 2000), vega (e.g., Cohen et al., 2000; Knopf et al., 2002), or both (e.g., Rogers, 2002; Rajgopal and Shevlin, 2002 ).”
Earnings Restatements, Changes in CEO Compensation, and Firm Performance (2008, methodology): “2 Using the context of Oil and Gas companies, Rajgopal and Shevlin (2002) find a positive relation between risk taking and stock return volatility.”
Customer Satisfaction, Cash Flow, and Shareholder Value (2005, methodology): “In line with the method that Rajgopal and Shevlin (2002) describe, we compared variability of a firm’s cash flow during a given year with the variability of cash flows of the broader market.”
Risk management and firm value: recent theory and evidence (2016, background): “Their paper is related to the earlier work of Rajgopal and Shevlin (2002), who find that stock option incentives induce CEOs to undertake increased exploration in the oil and gas industry.”
Taxation and Corporate Risk-Taking (2017, background): “…Growth (calculated as the one-year percentage change in revenues) to control for the ﬁrm’s investment opportunity set, as ﬁrms with a greater set of possible investments engage in more risk-taking (Guay 1999; Rajgopal and Shevlin 2002), but these ﬁrms are also less proﬁtable and pay fewer taxes.”