Publication: How do powerful CEOs view corporate risk-taking? Evidence from the CEO pay slice (CPS)
Issued Date
2015-01-01
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ISSN
14664291
13504851
13504851
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2-s2.0-84911366796
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Mahidol University
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SCOPUS
Bibliographic Citation
Applied Economics Letters. Vol.22, No.2 (2015), 104-109
Suggested Citation
Pandej Chintrakarn, Pornsit Jiraporn, Shenghui Tong How do powerful CEOs view corporate risk-taking? Evidence from the CEO pay slice (CPS). Applied Economics Letters. Vol.22, No.2 (2015), 104-109. doi:10.1080/13504851.2014.927565 Retrieved from: https://repository.li.mahidol.ac.th/handle/20.500.14594/35895
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Title
How do powerful CEOs view corporate risk-taking? Evidence from the CEO pay slice (CPS)
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Abstract
© 2014, © 2014 Taylor & Francis. We explore the role of powerful CEOs on the extent of risk-taking, using Bebchuk, Cremers and Peyer’s (2011) CEO pay slice (CPS). Based on more than 12,000 observations over 20 years (1992–2012), our results reveal a nonmonotonic association. In particular, relatively less powerful CEOs exhibit risk aversion, resulting in less risky strategies. However, when the CEO has his power consolidated beyond a certain point, he is less likely to compromise with other executives, leading to less moderate decisions and more risky strategies. We estimate that the CEO has to wield considerable power, that is, around the 75th percentile of CPS, before significantly more risk-taking is observed. Finally, we show that our results are unlikely vulnerable to endogeneity.