Arbeitspapier
Leverage and growth: effect of stock options
This paper investigates the potential effects of stock options on managers investment decisions and therefore on a firm s growth or, alternatively, on its leverage-growth relationship. To structure the analysis addressing this issue, the paper utilizes a framework establishing a negative relationship between leverage and the firm s growth. However, in contrast to some of the existing results, the empirical analysis of manufacturing firms in this paper shows that the negative relationship between leverage and growth has changed significantly. Primarily this paper documents that, as options based compensation in manager s portfolio increases, the negative effect of leverage on growth disappears. The paper argues that this is an important finding, because it implies that when managers are compensated with options debt ceases to pre-commit managers. On addressing the potential endogeneity problem between leverage, growth and compensation the paper finds that option delta instead of book leverage negatively affects growth, and that book leverage and option delta are inversely related. Finally, the paper also examines the effect of corporate governance on the relationship between leverage, incentives and the firm s growth and finds that leverage is negatively related to growth only in poorly governed firms.
- ISBN
-
978-952-462-776-4
- Sprache
-
Englisch
- Erschienen in
-
Series: Bank of Finland Research Discussion Papers ; No. 19/2011
- Klassifikation
-
Wirtschaft
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Francis, Bill
Hasan, Iftekhar
Sharma, Zenu
- Ereignis
-
Veröffentlichung
- (wer)
-
Bank of Finland
- (wo)
-
Helsinki
- (wann)
-
2011
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:44 MEZ
Datenpartner
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.
Objekttyp
- Arbeitspapier
Beteiligte
- Francis, Bill
- Hasan, Iftekhar
- Sharma, Zenu
- Bank of Finland
Entstanden
- 2011
Ähnliche Objekte (12)
Do networks in the stock exchange industry pay off? European evidence
Pricing risky bank loans in the new Basel II environment
Subordinated debt, market discipline, and bank risk
Credit default swaps and bank loan sales: evidence from bank syndicated lending
Banks' option to lend, interest rate sensitivity, and credit availability
Real effects of bank capital regulations: Global evidence
Secrecy, information shocks, and corporate investment: Evidence from European Union countries
Should competition policy in banking be amended during crises? Lessons from the EU
Friends for the benefits: The effects of political ties on sovereign borrowing conditions
How large banks use CDS to manage risks: bank-firm-level evidence
Central bank institutional structure and effective central banking: cross-country empirical evidence
Determinants of the loan loss allowance: some cross-country comparisons
Do networks in the stock exchange industry pay off? European evidence
Pricing risky bank loans in the new Basel II environment
Subordinated debt, market discipline, and bank risk
Credit default swaps and bank loan sales: evidence from bank syndicated lending
Banks' option to lend, interest rate sensitivity, and credit availability
Real effects of bank capital regulations: Global evidence
Secrecy, information shocks, and corporate investment: Evidence from European Union countries
Should competition policy in banking be amended during crises? Lessons from the EU
Friends for the benefits: The effects of political ties on sovereign borrowing conditions
How large banks use CDS to manage risks: bank-firm-level evidence
Central bank institutional structure and effective central banking: cross-country empirical evidence
Determinants of the loan loss allowance: some cross-country comparisons
Do networks in the stock exchange industry pay off? European evidence
Pricing risky bank loans in the new Basel II environment
Subordinated debt, market discipline, and bank risk
Credit default swaps and bank loan sales: evidence from bank syndicated lending
Banks' option to lend, interest rate sensitivity, and credit availability
Real effects of bank capital regulations: Global evidence
Secrecy, information shocks, and corporate investment: Evidence from European Union countries
Should competition policy in banking be amended during crises? Lessons from the EU
Friends for the benefits: The effects of political ties on sovereign borrowing conditions
How large banks use CDS to manage risks: bank-firm-level evidence
Central bank institutional structure and effective central banking: cross-country empirical evidence