Browsing by Subject "golden parachute"
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Item Golden Parachutes, Takeover Incentive, and Risk-taking(Midwest Finance Association 2013 Annual Meeting Paper, 2013-06-09) Chen, Dong; Rose, Morgan; Finance & Economics; Finance & EconomicsWe examine the relations between golden parachutes (GPs), pay-performance sensitivity (delta), and managerial risk-taking. We find an insignificant effect of GPs, but a negative and significant interaction of GPs with delta, on risk-taking. These results are consistent with the “takeover incentive hypothesis,” an original proposition stating that GPs influence risk-taking through the incentive of a CEO with a GP to accept a takeover, as well as delta’s role in affecting the weight of the CEO’s incentive to maximize the expected takeover-associated equity portfolio wealth. The findings do not support the proposition that GPs influence risk-taking through an insurance effect.Item Golden Parachutes, Takeover Probability, and Risk-Taking(Midwest Finance Association, 2011) Chen, Dong; Rose, Morgan J.This paper is the first to examine the relationships among golden parachutes (GPs), CEO compensation incentives, and managerial risk-taking. GPs are positively associated with risktaking, but only when controlling for the surprisingly negative interactions of GPs with CEO pay-volatility sensitivity (vega) and with pay-performance sensitivity (delta). These results appear consistent with the takeover probability hypothesis that a GP indicates a higher probability that a firm will be acquired, which increases the divergence between the CEO’s incentives as a manager and as an equity owner. The hypothesis that these results are due to CEO entrenchment is not supported.