Chen, DongRose, Morgan2020-12-072020-12-072013-06-09Chen, D. & Rose, M. J., Golden Parachutes, Takeover Incentive, and Risk-Taking (2013). Midwest Finance Association 2013 Annual Meeting Paper. http://dx.doi.org/10.2139/ssrn.2140088https://ssrn.com/abstract=2140088http://dx.doi.org/10.2139/ssrn.2140088http://hdl.handle.net/11603/20192We 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.48pagesen-USPublic Domain Mark 1.0http://creativecommons.org/publicdomain/mark/1.0/golden parachutecorporate governancepay-performance sensitivityrisk-takingtakeover incentiveentrenchmentdeltaText