Does Compensation by Stock Options Induce Excessive Risk Appetite in Executives?
In the laboratory experiment presented in this video, experimental CEOs were compensated either through stock options or restricted company stock. It shows that stock options induce excessive risk-taking in some cases and that company performance is generally better under compensation through restricted company stock. As FERDINAND M. VIEIDER points out, the main determinant of risk-taking under compensation through stock options was found to be the personal asset position of the experimental CEO.
DOI:
https://doi.org/10.21036/LTPUB10099University of Reading
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Original Publication
Risk Taking of Executives under Different Incentive Contracts: Experimental Evidence
Mathieu Lefèbvre
,Ferdinand M. Vieider
Published in 2013