Stockholder and Bondholder Wealth Effects of CEO Incentive Grants
Abstract"We examine stock and bond price reactions to CEOs' first stock option and/or restricted stock grants that appear on ExecuComp. We find positive stock price and negative bond price reactions. Changes in CEO pay-performance (delta) and stock volatility (vega) sensitivities relate to the reactions. Stock reactions decrease with the change in delta and increase with the change in vega. Bond reactions are the opposite and depend on the CEO's prior equity ownership. Stockholder and bondholder wealth effects are negatively correlated for grants that cause a large change in the vega of CEO wealth, consistent with aggravated risk-shifting incentives". Copyright (c) 2010 Financial Management Association International.
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Bibliographic InfoArticle provided by Financial Management Association International in its journal Financial Management.
Volume (Year): 39 (2010)
Issue (Month): 2 (06)
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- Beladi, Hamid & Quijano, Margot, 2013. "CEO incentives for risk shifting and its effect on corporate bank loan cost," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 182-188.
- Kenneth Shaw, 2012. "CEO incentives and the cost of debt," Review of Quantitative Finance and Accounting, Springer, vol. 38(3), pages 323-346, April.
- Liu, Yixin & Mauer, David C., 2011. "Corporate cash holdings and CEO compensation incentives," Journal of Financial Economics, Elsevier, vol. 102(1), pages 183-198, October.
- Goergen, Marc & Renneboog, Luc, 2011. "Managerial compensation," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 1068-1077, September.
- Kabir, Rezaul & Li, Hao & Veld-Merkoulova, Yulia V., 2013. "Executive compensation and the cost of debt," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2893-2907.
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