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Full-Text Articles in Business
Termination Risk And Managerial Risk Taking, Atreya Chakraborty, Shahbaz A. Sheikh, Narayanana Subramanian
Termination Risk And Managerial Risk Taking, Atreya Chakraborty, Shahbaz A. Sheikh, Narayanana Subramanian
Atreya Chakraborty
We test the hypothesis that managers who face a high termination risk make less risky investments than the managers who face a low termination risk. A 10% increase in our measure of termination risk is associated with a 5%–23% decline in stock returns volatility for the median firm in our sample. We also find that for CEOs who are more likely to be fired in the event of investment failure, the inhibiting effect of termination risk appears to offset the positive effect of convexity of managerial compensation on managerial risk taking. These results are robust to alternative definitions of forced …
Repricing And Executive Turnover, Narayanan Subramanian, Atreya Chakraborty, Shahbaz Sheikh
Repricing And Executive Turnover, Narayanan Subramanian, Atreya Chakraborty, Shahbaz Sheikh
Atreya Chakraborty
We examine whether the threat of executive turnover faced by a firm affects its decision to reprice stock options held by its executives. We estimate a model of voluntary turnover among top executives and show that the predicted turnover from this model is positively related to the probability of repricing. The relationship is robust to the inclusion of several known determinants of repricing. Our results are consistent with a model in which a tight labor market makes executives hard to replace, forcing firms to reprice stock options when they go underwater.