Does Greater Risk-Bearing in Stock Option Compensation Reduce the Influence of Problem Framing On Managerial Risk-Taking Behavior?
| Autor: | Arnold Wright, Kimberly M. Sawers, Valentina L. Zamora |
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| Rok vydání: | 2011 |
| Předmět: | |
| Zdroj: | Behavioral Research in Accounting. 23:185-201 |
| ISSN: | 1558-8009 1050-4753 |
| Popis: | We examine the extent to which the behavioral agency model reflects the relation between greater risk-bearing in stock option compensation and managerial risk-taking. The behavioral agency model predicts that managers with greater wealth at stake will avoid risky projects that threaten their wealth. This greater risk-bearing effect moderates the problem-framing effect, which predicts that loss-averse managers will be more (less) risk-taking when choosing among loss (gain) projects. Using a 2 × 2 between-subjects experiment with 108 M.B.A. students acting as managers, we find that managers are more risk-taking in the loss context than in the gain context when they have at-the-money stock options but not when they have wealth at stake through in-the-money stock options. Further, we find that managers with in-the-money stock options are less risk-taking than managers with at-the-money stock options in the loss context. These findings support the behavioral agency model prediction that greater risk-bearing in stock option compensation (moving from at-the-money stock options to in-the-money stock options) reduces the problem framing effect on risk-taking behavior, particularly when the firm faces a loss decision context. Our results point to the importance of considering the implications of risk-bearing in stock option compensation for managers choosing risky projects that affect firm value. |
| Databáze: | OpenAIRE |
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