Title: Managerial equity incentive, corporate risk-taking, and corporate performance

Authors: Jiang-hong Zeng; Lin-ping Tan; Xiao-hong Chen

Addresses: School of Business, Central South University, No. 932, Lushan South Road, Changsha 410083, China ' School of Business, Central South University, No. 932, Lushan South Road, Changsha 410083, China ' School of Business, Central South University, No. 932, Lushan South Road, Changsha 410083, China

Abstract: Based on data from the equity incentive plans of Chinese firms listed on the stock market between 2006 and 2011, this study empirically investigates the relationship between managerial equity incentive, corporate risk-taking, and corporate performance. The paper first uses the volatility of corporate earnings in order to measure the degree of corporate risk-taking, and the findings suggest that there is a significantly positive association between managerial equity incentive and corporate risk-taking. Moreover, compared to lower level staff, the risk-taking effect on managers is stronger. Additionally, the degree of corporate risk-taking of sample in China is low. Therefore an increase in the level of corporate risk-taking can considerably increase the firm's value. This paper also uses the volatility of stock returns as a proxy variable of the degree of corporate risk-taking, and the findings do not change substantially.

Keywords: executive stock options; managerial incentives; equity incentives; corporate risk taking; firm value; corporate performance; China; stock return volatility; stock returns.

DOI: 10.1504/IJSPM.2014.066370

International Journal of Simulation and Process Modelling, 2014 Vol.9 No.4, pp.246 - 254

Received: 24 Jan 2014
Accepted: 11 Jun 2014
Published online: 30 Apr 2015 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article