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The influences of the chief executive officer's stock and option ownership on firm risk taking: an examination of resource allocation choices.
- Article from:
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Academy of Strategic Management Journal
- Article date:
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January 1, 2007
- Author:
- Wright, Peter; Kroll, Mark; Davis, Peter; Jackson, William T.
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Copyright informationCOPYRIGHT 2007 The DreamCatchers Group, LLC. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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ABSTRACT
We examine the influences of the chief executive officer's (CEO's) stock and option ownership on firm risk taking, proxied by resource allocations to research and development (R&D), discretionary funds, and advertising. We contend that at low to moderate values of managerial stock ownership, risk-increasing decisions may predominate. At substantial executive equity values, however, we suggest that risk-reducing decisions may be motivated. In contrast, our contention is that CEO option holding values are monotonically and directly associated with corporate risk taking. Additionally, we expect the joint effects of stock and options on firm risk may be different ...