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dc.contributor.authorYeung, Bernard-
dc.contributor.authorLitov, Lubomir-
dc.contributor.authorJohn, Kose-
dc.description.abstractWe 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.en
dc.subjectCorporate Governanceen
dc.subjectInvestor Protectionen
dc.subjectManagerial Incentivesen
dc.titleCorporate Governance and Managerial Risk Taking: Theory and Evidenceen
dc.typeWorking Paperen
Appears in Collections:Economics Working Papers

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