How to strike a balance between CEO compensation and strategic risk? A longitudinal analysis

摘要

Purpose - The purpose of this paper is to examine the relationships between CEO ownership, stock option compensation, and risk taking. The authors include important CEO power variables as moderators. Design/methodology/approach - The paper uses a longitudinal regression analysis. In addition, the paper includes interactional plots for further interpretation. Findings - The results indicate that CEO ownership reduces risk taking, while there is a partial support that stock options increase risk taking. CEO tenure is a powerful moderator that decreases risk taking in both CEO ownership and CEO stock option scenarios. Board independence, counter to the hypothesis in this paper, may encourage risk taking. Research limitations/implications - The findings in this paper provide support for the inclusion of CEO power variables in CEO compensation studies. However, the study examines large publicly traded companies; thus, all findings may not be applicable to small- and medium-sized companies. Originality/value - Scholars have encouraged more complex CEO compensation models and the authors have examined both main effect and interaction models.