Andreas Milidonis
University of Cyprus
Managerial Incentives, Risk Aversion, and Debt.
- Our results challenge the common assumption that the provision of convex payoffs to managers always increases their appetite for risk.
- We find empirical evidence that risk-averse CEOs reduce firm risk even in the presence of strong risk taking incentives.
- We posit that managerial career concerns enhance managerial CEO risk aversion.
- CEOs in highly levered firms or firms with high default probability behave more conservatively than CEOs with lower leverage or lower default probabilities.