Low interest rates and executive risk-taking incentivesEvidence from the united states

  1. Paula Castro 1
  2. Maria Teresa Tascon Fernandez 1
  3. Francisco Javier Castaño Gutiérrez 1
  4. Borja Amor-Tapia 1
  1. 1 University of Leon, Spain.
Revista:
Business Research Quarterly

ISSN: 2340-9444,  2340-9436

Año de publicación: 2021

Volumen: 24

Número: 4

Páginas: 324-354

Tipo: Artículo

DOI: 10.1177/2340944420927716 DIALNET GOOGLE SCHOLAR lock_openBULERIA editor

Otras publicaciones en: Business Research Quarterly

Resumen

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.

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Información de financiación

Financiadores

  • University of Leon
    • ULE2012-1
  • Spanish Ministry of Education, Culture and Sports
    • AP2012-1959

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