The Role of Affect in Shaping the Behavioral Consequences of CEO Option Incentives

Zolotoy, Leon and O’Sullivan, Don and Martin, Geoffrey P. and Veeraraghavan, Madhu (2018) The Role of Affect in Shaping the Behavioral Consequences of CEO Option Incentives. Journal of Management, 20 (10). pp. 1-32.

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Abstract

We advance behavioral agency theory by exploring the influence of mood or “affect” on the behavioral consequences of stock option incentives. Drawing on insights from psychology and behavioral decision theory, we describe how affect influences agent risk behavior. We argue that positive affect amplifies both the extent to which executives reduce strategic risk taking in response to risk bearing and engage in strategic risk taking in response to incentives for further enrichment. Building again on the psychology literature, we describe how CEO accountability attenuates the influence of affect on CEO risk behavior in response to stock option incentives. We test our expectations in a longitudinal data set of CEO stock option incentives, affect, and strategic risk taking by U.S. firms.

Item Type:	Article
Uncontrolled Keywords:	Agency Theory; Executive Compensation; Strategic Decision Making; Affect
Subjects:	Finance
Divisions:	Finance and Strategy
Depositing User:	Mr. Muralidhara D
Date Deposited:	19 Dec 2018 09:40
Last Modified:	14 Feb 2019 06:20
URI:	http://tapmi.informaticsglobal.com/id/eprint/561

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