An Analysis of the Association Between Firm Risk, Executive Share Options and Accounting Performance: Some Australian Evidence


Autoria(s): Hutchinson, Marion
Data(s)

01/01/2003

Resumo

This paper examines whether the financial performance of the firm is associated with the risk-taking propensity of executives, which is inferred from the structure of their share option portfolio. The objective of this paper is to determine if executives have greater risk bearing preferences when they have more share options than shares in their firm. In turn, executives' risk-taking preferences suggest that these decision-makers adopt value-increasing strategies. The results of this study support this notion. The results of the study of 182 Australian firms demonstrate that the negative relationship between firm risk and firm performance is weaker when executives hold a higher proportion of share options than shares in their investment in the firm. These results hold implications for executives' compensation contracts. That is, executives who share in their firms' risk via share options are more likely to undertake risky activities with high-expected performance outcome.<br />

Identificador

http://hdl.handle.net/10536/DRO/DU:30001964

Idioma(s)

eng

Publicador

Emerald Group

Relação

http://dro.deakin.edu.au/eserv/DU:30001964/hutchinson-analysisof-2003.pdf

http://dx.doi.org/10.1108/eb027012

Palavras-Chave #Firm performance #firm risk, #share-options
Tipo

Journal Article