|
Archive@NYU >
Stern School of Business >
Economics Working Papers >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26149
|
| Title: | Corporate Governance and Managerial Risk Taking: Theory and Evidence |
| Authors: | Yeung, Bernard
Litov, Lubomir
John, Kose |
| Keywords: | Corporate Governance
Investor Protection
Managerial Incentives |
| Issue Date: | 17-Dec-2004 |
| Series/Report no.: | EC-04-35 |
| Abstract: | We study how the investor protection environment affects corporate
managers’ incentives to take value-enhancing risks. In our model,
the manager chooses higher perk consumption when investor protection is
low. Since perks represent a priority claim held by the manager, lower
investor protection leads the manager to implement a sub-optimally
conservative investment policy, effectively aligning her risk-taking
incentives with those of the debt holders. By the same token, higher
investor protection is associated with riskier investment policy and
faster firm growth. We test these predictions in a large Global Vantage
panel. We find strong empirical confirmation that corporate risk-taking
and firm growth rates are positively related to the quality of investor protection. |
| URI: | http://hdl.handle.net/2451/26149 |
| Appears in Collections: | Economics Working Papers
|
All items in Faculty Digital Archive are protected by copyright, with all rights reserved.
|
