Convexity, magnification, and translation: the effect of managerial option-based compensation on corporate cash holdings

Belghitar, Yacine and Clark, Ephraim A. (2014) Convexity, magnification, and translation: the effect of managerial option-based compensation on corporate cash holdings. The Journal of Financial Research, 37 (2). pp. 191-210. ISSN 0270-2592

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Abstract

Using the distinctions among the convexity, magnification, and translation effects, we identify the pertinent parameters and examine empirically the relation between cash holdings and option-based managerial compensation. We show that changes in delta reduce the effects of magnification and convexity on managerial risk aversion. We also provide evidence that there is a negative relation between the option-based incentives delta and vega and cash holdings. These results are robust when incentives are extended to include all executive board members and when the sample is broken down according to different risk characteristics.

Item Type: Article
Additional Information: Article first published online: 11 Jun 2014
Research Areas: A. > Business School > Accounting and Finance
Item ID: 17101
Useful Links:
Depositing User: Sasha Antoni
Date Deposited: 29 Jun 2015 08:51
Last Modified: 05 Sep 2018 12:48
URI: http://eprints.mdx.ac.uk/id/eprint/17101

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