1-20

Research papers

• Chien, Ming - Che
• Wen, Min - Ming
• Yang, Charles C.

This study investigates the impact of stock-option-based (SOB) executivecompensation by lodging industry firms on risk-taking, and whether or notperceptions of the risk firms face affects the design of CEOs’ compensationcontracts. The data analyzed include market-based risk measures and executivecompensation for 98 firms over the period from 1992 to 2005 (totaling 734 firm-CEO observations). The study examines research questions by using three-stageleast squares in estimating a two-equation simultaneous equation system, inwhich both firm’s risks and compensation structures are endogenous. Risk ismeasured by total risk and idiosyncratic risk. Results show that contracts withlarge versus small bonus-option components induce risk-taking and in addition,perceptions of firms’ risk do substantially impact the design of compensationcontracts.

• Other social sciences
• Economics and Business

• Τουρισμός
• Business management

option-based compensation, risk, executive compensation, compensation structure, lodging industry

Περιέχει πίνακες και βιβλιογραφία, Ειδικό αφιέρωμα: Tourism destination marketing & management

1. Aggarwal, R.K., & Samwick, A. (1999). The other side of the trade-off: Theimpact of risk on executive compensation. Journal of Political Economy,Vol. 107, pp. 65-105.Barber, N., Ghiselli, R., & Deale, C. (2006). Assessing the relationship of CEOcompensation and company financial performance in the restaurantsegment of the industry. Journal of Food Service Business Research, Vol.9, No 2, pp. 65–82.Brickley, J., Coles, J., & Jarrell, G. (1997). Leadership structure: Separating theCEO and chairman of the board. Journal of Corporate Finance, Vol. 3,pp. 189-220.Bryan, S., Hwang, L., & Lilien, S. (2000). CEO stock-based compensation: Anempirical analysis of incentive-intensity, relative mix, and economicdeterminants. Journal of Business, Vol. 73, pp. 661-693.Carr, L.L. (1997). Strategic determinants of executive compensation in smallpublicly traded firms. Journal of Small Business Management, Vol. 35,No 2, pp. 1–12.Chen, C.R., Steiner, T. L., & Whyte, A. M. (2006). Does stock option-basedexecutive compensation induce risk-taking? An analysis of the bankingindustry. Journal of Banking and Finance, Vol. 30, pp. 915-946.Conger, J.A., Finegold, D., & Lawler, E.E. (1998). Appraising boardroomperformance. Harvard Business Review, Vol. 76, No 1, pp. 136-148.Cooley, P.L. (1979). Managerial pay and financial performance of small business.Journal of Business Research, Vol. 7, No 3, pp. 267–276.Core, J., Holthausen, R., & Larcker, D. (1999). Corporate governance, chiefexecutive officer compensation, and firm performance. Journal ofFinancial Economics, Vol. 51, pp. 371-406.Cummins, J.D., Phillips, R., & Smith, S.D. (2001). Derivatives and corporate riskmanagement: Participation and volume decisions in the insuranceindustry. Journal of Risk and Insurance, Vol 68, pp. 51-92.Elston, J.A., & Goldberg, L.G. (2003). Executive compensation and agency costsin Germany. Journal of Banking and Finance, Vol. 27, No 7, pp. 1391–1410.Finkelstein, S., & Hambrick, D.C. (1989). Chief executive compensation: A studyof the intersection of markets and political processes. StrategicManagement, Vol. 10, No 2, pp. 121–134.Fotiadis Anestis & Chris Vassiliadis (2013). The effects of a transfer to newpremises on patients’ perceptions of service quality in a General Hospitalin Greece. Total Quality Management and Business Excellence, Vol 24,No 9-10, pp.1022-1034.Fotiadis Anestis, Chris Vassiliadis & Panayotis Rekleitis (2013). The constraintsand benefits of sustainable development: a case study based on theperceptions of small hotel entrepreneurs in Greece. Anatolia. AnInternational Journal of Tourism and Hospitality Research, Vol. 24, No2,pp. 144-161.Garen, J. E. (1994). Executive compensation and principal-agent theory. Journalof Political Economy, Vol. 102, pp. 1175-1199.Grace, E. (2004). Contracting incentives and compensation for property-liabilityinsurer executives. Journal of Risk and Insurance, Vol. 71, pp. 285-307.Gu, Z. & Choi, Y.H. (2004). CEO compensation in the casino industry. Journal ofHospitality and Tourism Research, Vol. 28, No 2, pp.143–155.Houston, J.F. & James, C. (1995). CEO compensation and bank risk: Iscompensation in banking structured to promote risk-taking. Journal ofMonetary Economics, Vol. 36, pp. 405-431.Huang, P.S., Ryan, H., Jr., & Wiggins, R., III. (2007). The influence of firm- andCEO-specific characteristics on the use of nonlinear derivativeinstruments. Journal of Financial Research, Vol. 30, No 3, pp. 415–436.Jensen, M. & Murphy, K.J. (1990a). Performance pay and top managementincentives. Journal of Political Economy, 98, pp. 225-264.Jensen, M. & Murphy, K.J. (1990b). CEO incentives – It’s not how much youpay, but how. Harvard Business Review, Vol. 68, pp. 53-69.John, K. Saunders, A., & Senbet, L.W. (2000). A theory of bank regulation andmanagement compensation. Review of Financial Studies, Vol. 13, 95-125.Judge, G.G., Hill, R.C., Griffiths, W.E., Lütkepohl, H. & Lee, T.C. (1988).Introduction to the theory and practice of econometrics, 2nd ed. JohnWiley & Sons, Inc.Kefgen, K., & Mahoney, R. (1996). Compensation and benefits in the gamingindustry. Ideas & Trends, Hotel Online, HVS International ExecutiveSearch. www.hotelonline.com/Neo/Trends/HVS/HVS_Executive_Search.htmlKim, H. & Gu, Z. (2005). A preliminary examination of determinants of CEOcash compensation in the U.S. restaurant industry from an agency theoryperspective. Journal of Hospitality and Tourism Research, Vol. 29, No 3,pp. 341–355.Marx, L., Mayers, D., & Smith, C. (2001). Insurer ownership structure andexecutive compensation as compliments. Journal of Risk and Insurance,Vol. 68, pp.449-463.McKnight, P.J. (1996). An explanation of top executive pay: A UK study. BritishJournal of Industrial Relations, Vol. 34, No 4, 557–566.Mehran, H. (1995). Executive compensation structure, ownership, and firmperformance. Journal of Financial Economics, Vol. 38, 163-184.Merton, R. (1977). An analytic derivation of the cost of deposit insurance andloan guarantees: An application of modern option pricing theory. Journalof Banking and Finance, Vol. 3, pp. 3-11.Riahi-Belkaoui, A. (1992). Executive compensation, organizational effectiveness,social performance and firm performance: An empirical investigation.Journal of Business Finance and Accounting, Vol. 19, No 1, pp. 25–38.Rogers, D.A. (2005). Managerial risk-taking incentives and executive stock optionrepricing: A study of US casino executives. Financial Management, Vol.34, No 1, pp.95-122.Singh, A. & Upneja, A. (2008). The determinants of the decision to use financialderivatives in the lodging industry. Journal of Hospitality & TourismResearch, 32, pp. 423.Smith, C. & Watts, R. (1992). The investment opportunity set and corporatefinancing, dividend and compensation policies. Journal of FinancialEconomics Vol. 32, pp. 263-292.Sturman, M. C. (2001). Does the hospitality industry short-change its employeesand itself? Cornell Hotel & Restaurant Administration Quarterly, Vol. 42,pp. 70-76.Stylos, N. & Vassiliadis, C. (2011). The Evolution of Services MarketingDiscipline in the Technological Era, International Journal of AsianTourism Management, Vol. 2, No. 1, pp. 71-85.Tufano, P. (1996). Who manages risk? An empirical analysis of risk managementpractices in the gold mining industry, Journal of Finance, Vol. 51, pp.1097–1137.Yermack, D. (1996). Higher market valuation for firms with a small board ofdirectors. Journal of Financial Economics, Vol. 40, pp. 185-211.Vafeas, N. (1999). Board meeting frequency and firm performance. Journal ofFinancial Economics, Vol. 53, pp. 113-142.Wilson, A. & Higgins, E. (2001). CEO pay/performance sensitivity in theinsurance industry. Journal of Insurance Issues, Vol. 24, pp. 1-16.