TY - JOUR
T1 - How do powerful CEOs view corporate risk-taking? Evidence from the CEO pay slice (CPS)
AU - Chintrakarn, Pandej
AU - Jiraporn, Pornsit
AU - Tong, Shenghui
N1 - Publisher Copyright:
© 2014, © 2014 Taylor & Francis.
PY - 2015/1/22
Y1 - 2015/1/22
N2 - We explore the role of powerful CEOs on the extent of risk-taking, using Bebchuk, Cremers and Peyer’s (2011) CEO pay slice (CPS). Based on more than 12,000 observations over 20 years (1992–2012), our results reveal a nonmonotonic association. In particular, relatively less powerful CEOs exhibit risk aversion, resulting in less risky strategies. However, when the CEO has his power consolidated beyond a certain point, he is less likely to compromise with other executives, leading to less moderate decisions and more risky strategies. We estimate that the CEO has to wield considerable power, that is, around the 75th percentile of CPS, before significantly more risk-taking is observed. Finally, we show that our results are unlikely vulnerable to endogeneity.
AB - We explore the role of powerful CEOs on the extent of risk-taking, using Bebchuk, Cremers and Peyer’s (2011) CEO pay slice (CPS). Based on more than 12,000 observations over 20 years (1992–2012), our results reveal a nonmonotonic association. In particular, relatively less powerful CEOs exhibit risk aversion, resulting in less risky strategies. However, when the CEO has his power consolidated beyond a certain point, he is less likely to compromise with other executives, leading to less moderate decisions and more risky strategies. We estimate that the CEO has to wield considerable power, that is, around the 75th percentile of CPS, before significantly more risk-taking is observed. Finally, we show that our results are unlikely vulnerable to endogeneity.
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U2 - 10.1080/13504851.2014.927565
DO - 10.1080/13504851.2014.927565
M3 - Article
AN - SCOPUS:84911366796
SN - 1350-4851
VL - 22
SP - 104
EP - 109
JO - Applied Economics Letters
JF - Applied Economics Letters
IS - 2
ER -