Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/261911 
Year of Publication: 
2021
Citation: 
[Journal:] BRQ Business Research Quarterly [ISSN:] 2340-9436 [Volume:] 24 [Issue:] 4 [Publisher:] Sage Publishing [Place:] London [Year:] 2021 [Pages:] 324-354
Publisher: 
Sage Publishing, London
Abstract: 
This article contributes to the literature by indicating how certain monetary policies impact the compensation incentives of US managers to adopt riskier business policies. Specifically, based on the agency problems between shareholders and managers and between shareholders and creditors, a research framework is developed to identify the influence of low interest rates on managers' risk-taking incentives proxied by the sensitivity of executive compensation to stock return volatility (Vega). We examine 1,293 firms in the United States between 2000 and 2016, and the results indicate that low interest rates increase the managers' short-term risk-taking incentives and that those incentives contribute to the risk effectively taken by the firm. Our results are robust to the use of alternative monetary proxies and to the presence of passive versus active institutional shareholders.
Subjects: 
Executive compensation
monetary policies
low interest rates
managers' risk-taking incentives
ZLB policy
JEL: 
E41
E43
E51
M12
M52
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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