Options, Option Repricing in Managerial Compensation: Their Effects on Corporate Investment Risk

摘要：

While stock options are commonly used in managerial compensation to pro- vide desirable incentives, their adverse e.ects have not been widely appre- ciated. We show that a call-type contract creates incentives to distort the choice of investment risk. Relative to the risk level that maximizes firm value, a call option contract can induce too much or too little corporate risk- taking, depending on managerial risk aversion and the underlying investment technology. We show that inclusion of lookback call options in compensa- tion packages has desirable countervailing effects on managerial choice of corporate risk policies and can induce risk policies that increase shareholder wealth. We argue that lookback call options are analogous to the observed practice of option repricing.

作者: Nengjiu Ju Hayne Leland Lemma W. Senbet

作者单位: School of Business and Management, Hong Kong University of Science and Technology, ClearWater Bay, H Haas School of Business, University of California, Berkeley, CA 94720 Robert H. Smith School of Business, University of Maryland, College Park, MD 20742

会议类型: 国际会议

会议名称: 2005年中国金融国际年会

会议地点: 昆明

会议语种:英文

页码: 1-33

在线出版日期: 2005-07-05（万方平台首次上网日期，不代表论文的发表时间）