Share-based pay and its effects on managerial risk-taking

Bachelor Thesis, 2013

53 Pages


Table of contents

List of figures

List of Tables

List of Appendices

List of abbreviations

1 The growing use of stock-based compensation

2 The diverging risk preferences of principal and agent

3 Overcoming managerial risk aversion

4 The risk premium on share-based pay
4.1 The influence of the exercise price, degree of diversification and the risk aversion parameter on the risk premium of the manager
4.2 The importance to distinguish between firm-specific and systematic risk when the market portfolio can be traded
4.3 Implications for the use of share-based pay and research on the effects of share- based pay

5 Theoretical predictions on the risk incentives provided by share-based pay
5.1 The effects of managerial risk aversion and compensation design on risk incentives provided by share-based pay
5.2 The incentives provided by share-based pay regarding total risk
5.3 The effects provided by share-based pay to change systematic risk, firm-specific risk and the correlation between company returns and market returns

6 Empirical findings on the relationship between share-based pay and company risk
6.1 Estimating the sensitivities to stock price and stock volatility of a manager’s portfolio with the “one-year” approach
6.2 The joint determination of firm risk characteristics and share-based pay
6.3 The incentives provided by vega and delta to change the components of risk

7 Descriptive analyses of the pay-performance sensitivities of German DAX and MDAX executives
7.1 Sample description
7.2 Calculation of the pay-performance sensitivity
7.3 The alignment of DAX and MDAX board members

8 Summary of results


List of references

Excerpt out of 53 pages


Share-based pay and its effects on managerial risk-taking
Technical University of Munich
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
901 KB
share-based pay, managerial risk-taking, manager, shareholders, agency theory, compensation, risk premium, risk incentives, stock-based compensation, pay-performance, stock, option, portfolio, board members, DAX, MDAX
Quote paper
Patrick Gebhard (Author), 2013, Share-based pay and its effects on managerial risk-taking, Munich, GRIN Verlag,


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