Effects of Executive Long-term Incentive Compensation and Ownership Structure On Perceptions of Risk

Open Access
Author:
Navat, Orian
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Timothy Grant Pollock, Thesis Supervisor
  • Brian Spangler Davis, Honors Advisor
Keywords:
  • LTIP
  • ownership structure
  • debt to equity ratio
  • financial leverage
  • agency theory
  • prospect theory
  • risk
Abstract:
This study explores the relationship between a firm’s ownership structure on CEO long-term incentive compensation and its role in a CEO’s risk appetite through financial leverage. The study encompasses the S&P 500 companies during the years of 2010-2013 using a fixed effect panel regression for empirical analysis. Its purpose is to further expand the agency-based literature on executive risk taking in regards to the effects of block holders and implementation of a payout structure more skewed towards the long-term incentive plan.