Abstract
In this paper, we first review the finance literature on managerial risk-taking incentives that is based on various fixed effect models (FEs). Second, we discuss the differences between industry and firm FEs with overall-, between-, and within-variations in corporate policies. Third, we investigate the effect of managerial risk-taking incentives on the values and decisions of firms as examples to support the discussion. Following Coles, Daniel, and Naveen (2006), we use Vega to measure the incentives. Our empirical results except for R&D expenditures show that a firm FE provides results consistent with other studies when we examine the effect of Vega on the values and decisions of firms. The evidence supports the idea that firms with high Vegas may have low values and capital expenditures, and high leverages and high payouts.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
