Managerial Risk-Taking and CEO Excess Compensation

This paper examines risk taking and CEO excess compensation problems in U.S firms to determine their impact on shareholders wealth. Literature suggests a positive effect of CEO incentive risk and strong corporate governance on CEO risk taking. Furthermore, the strong governance mitigates excess compensation problem. Controlling for governance quality and incentive risk, I provide empirical evidence of a significant association between risk taking and CEO excess compensation. When I also control for pay-performance sensitivity (delta) and feedback effects of incentive compensation on CEO risk taking, I find that higher use of incentive pay encourages risk taking, and due to a high exposure to risk CEOs draws excess compensation. Furthermore, I find that the excess compensation problem is more serious with CEOs taking high risk than with those taking low risk. Finally, I find that CEO risk taking also has structural impacts on CEO compensation

Name thesis:degree_name

M.Sc. Management

Level thesis:degree_level

Masters

Discipline thesis:degree_discipline

Faculty of Business

Department dc:contributor.department

Faculty of Business Programs

Grantor

Brock University

Year dc:date.issued

2013

Author dc:creator

• Jafri, Syed Rahat Ali

• Risk Taking
• Excess Compensation
• CEO risk taking
• CEO excess compensation
• Executive compensation

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/10464/4375

OAI identifier oai:identifier

oai:brocku.scholaris.ca:10464/4375