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BEGIN:VEVENT
UID:6c72ddd1a317b259a9278f40ce287c03
CATEGORIES:Seminars
CREATED:20170418T181938
SUMMARY:Lunch Seminar: Andrew Ellul - Indiana University’s Kelley School of Business
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:<p style="text-align: justify;"><strong>Labor Unemployment Risk and CEO Inc
 entive Compensation</strong></p><p style="text-align: justify;">Abstract:<b
 r /> We investigate the impact of workers’ exposure to unemployment risk on
  the design of CEO incentive compensation. Through its impact on risk-takin
 g activities, option-based compensation is likely to also influence unemplo
 yment risk which is internalized by the firm. Exploiting state-level change
 s in unemployment insurance benefits as a source of variation in the unempl
 oyment costs faced by workers, we find that, after unemployment insurance b
 enefits increase, boards provide managers with more stock option grants tha
 t result in more convexity payoffs. This behavior is consistent with the vi
 ew that CEO’s risk-taking incentives are amplified by the board to take adv
 antage of lower costs associated with unemployment risk. The increase in co
 nvexity payoff structures is stronger when CEO wealth is tied closely to fi
 rm performance, more pronounced in labor-intensive industries, and attenuat
 ed by the strength of unionization. The increase in the convexity payoff fr
 om option-based compensation induces managers to increase the riskiness of 
 investments and leverage. These results suggest that firms respond to unemp
 loyment risk by changing their risk taking behavior, and one channel throug
 h which they do so is executive compensation.</p>
DTSTAMP:20260403T203207Z
DTSTART:20160708T130000Z
DTEND:20160708T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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