Arbeitspapier

Shadow risks and disasters

We explore the relationship between incentives and Shadow Risks - those risks that are not easily captured by common financial measures and yet can lead to major adverse events. Theoretically, increased risk-taking is nonmonotonic in higher powered executive compensation. However, for those settings where risky failures are high-stakes - e.g., potential environmental disasters and accounting scandals - the relationship is positive. We test these predictions for environmental and financial accounting failures of large US firms and find that changing CEO equity compensation from 100% stocks to 100% options can increases the odds of an event by 40-60% and the magnitude of such events by over 100%. The effectiveness of policies such as Sarbanes-Oxley and FAS123R in reducing Shadow Risk-taking are discussed.

Sprache
Englisch

Erschienen in
Series: CSIO Working Paper ; No. 0127

Klassifikation
Wirtschaft
Thema
executive compensation
corporate governance
managerial risk-taking
environmental law
accounting law
misconduct
financial crisis

Ereignis
Geistige Schöpfung
(wer)
Minor, Dylan
Ereignis
Veröffentlichung
(wer)
Northwestern University, Center for the Study of Industrial Organization (CSIO)
(wo)
Evanston, IL
(wann)
2014

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Minor, Dylan
  • Northwestern University, Center for the Study of Industrial Organization (CSIO)

Entstanden

  • 2014

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