Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/60698
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dc.contributor.authorMehran, Hamiden_US
dc.contributor.authorRosenberg, Joshuaen_US
dc.date.accessioned2012-08-17T14:29:03Z-
dc.date.available2012-08-17T14:29:03Z-
dc.date.issued2007en_US
dc.identifier.urihttp://hdl.handle.net/10419/60698-
dc.description.abstractIn this paper, we assess the effects of CEO stock options on three key corporate policies for banks: investment choice, amount of borrowing, and level of capital. Using a sample of 549 bank-years for publicly traded banks from 1992 to 2002, we find that stock option grants lead CEOs to undertake riskier investments. In particular, higher levels of option grants are associated with higher levels of equity and asset volatility. Consistent with the role of options as a nondebt tax shield, we also show that option grants reduce the banks’ incentive to borrow as evidenced by lower levels of interest expense and federal funds borrowing. Furthermore, we demonstrate that increases in CEO and employee stock option grants result in increased bank capital levels, perhaps because option grants create a contingent liability for the firm that needs to be funded in advanceen_US
dc.language.isoengen_US
dc.publisher|aFederal Reserve Bank of New York |cNew York, NYen_US
dc.relation.ispartofseries|aStaff Report, Federal Reserve Bank of New York |x305en_US
dc.subject.jelG21en_US
dc.subject.jelG28en_US
dc.subject.jelG32en_US
dc.subject.jelJ33en_US
dc.subject.jelM41en_US
dc.subject.ddc330en_US
dc.subject.keywordCEO compensation, employee stock options, risk taking, banking firms, borrowing, bank capitalen_US
dc.subject.stwLeistungsentgelten_US
dc.subject.stwAktienoptionen_US
dc.subject.stwFührungskräfteen_US
dc.subject.stwBankrisikoen_US
dc.subject.stwRisikopräferenzen_US
dc.subject.stwBilanzstrukturmanagementen_US
dc.subject.stwSchätzungen_US
dc.subject.stwUSAen_US
dc.titleThe effect of employee stock options on bank investment choice, borrowing, and capitalen_US
dc.typeWorking Paperen_US
dc.identifier.ppn550544232en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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