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
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Series: CSIO Working Paper ; No. 0127
- Klassifikation
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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
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Objekttyp
- Arbeitspapier
Beteiligte
- Minor, Dylan
- Northwestern University, Center for the Study of Industrial Organization (CSIO)
Entstanden
- 2014