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dc.contributor.authorMehran, Hamiden
dc.contributor.authorRosenberg, Joshuaen
dc.date.accessioned2012-08-17T14:29:03Z-
dc.date.available2012-08-17T14:29:03Z-
dc.date.issued2007-
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
dc.language.isoengen
dc.publisher|aFederal Reserve Bank of New York |cNew York, NYen
dc.relation.ispartofseries|aStaff Report |x305en
dc.subject.jelG21en
dc.subject.jelG28en
dc.subject.jelG32en
dc.subject.jelJ33en
dc.subject.jelM41en
dc.subject.ddc330en
dc.subject.keywordCEO compensation, employee stock options, risk taking, banking firms, borrowing, bank capitalen
dc.subject.stwLeistungsentgelten
dc.subject.stwAktienoptionen
dc.subject.stwFührungskräfteen
dc.subject.stwBankrisikoen
dc.subject.stwRisikopräferenzen
dc.subject.stwBilanzstrukturmanagementen
dc.subject.stwSchätzungen
dc.subject.stwUSAen
dc.titleThe effect of employee stock options on bank investment choice, borrowing, and capital-
dc.typeWorking Paperen
dc.identifier.ppn550544232en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

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