Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/270240 
Year of Publication: 
2021
Citation: 
[Journal:] Cogent Business & Management [ISSN:] 2331-1975 [Volume:] 8 [Issue:] 1 [Article No.:] 1894893 [Year:] 2021 [Pages:] 1-19
Publisher: 
Taylor & Francis, Abingdon
Abstract: 
While CEO compensation is seen as influencing firm performance, the intervening mechanisms that govern this influence have remained largely unexplored. Using the agency and expectancy theories, this paper attempts to open the "black box" between CEO compensation and firm performance and empirically tests the intervening effect of CEO risk-taking behavior on this relationship. Specifically, we hypothesize that CEO compensation indirectly influences firm performance through its direct effects on CEO risk-taking behavior. Results based on data collected from 204 U.S. manufacturing firms revealed a strong, positive relationship between CEO option pay and a firm's strategic risk, stock returns risk, and income stream risk. Results also showed that firm strategic risk, measured by R&D expenditure, mediates the CEO option pay-firm performance relationship, sometimes fully and sometimes partially, depending on which type of performance is being examined.
Subjects: 
CEO compensation
risk-taking behavior
firm performance
agency theory
expectancy theor
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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