Assessing the effect of executive stock option plans on agency costs and risk-taking behavior of managers in listed firms for the years 2002-2006
Date of Publication
2008
Document Type
Bachelor's Thesis
Degree Name
Bachelor of Science in Management of Financial Institutions
College
Ramon V. Del Rosario College of Business
Department/Unit
Financial Management
Thesis Adviser
Andrew Adrian Y. Pua
Defense Panel Member
Carlo A. Asuncion
Ring Joven
Rene Pongco, Jr.
Abstract/Summary
The design of compensation schemes has been a dominant approach in corporate institutions to remedy the agency problem. One particular incentive is executive stock option plans. Providing a direct link between realized compensation and company stock-price performance, stock options functions to mitigate underinvestment by inducing managers to undertake high-risk but profitable investments. Using panel data from 2002-2006 for 60 firms listed in the Philippine Stock Exchange, we find that executive stock options induce risk-taking for holding firms only and consequently decrease agency costs in this sector as well. We also find that, in general, top managers continue to exhibit risk-aversion despite the issuance of stock option plans. From these results, we posit that the improvement in corporate governance practices plays an important role in reducing managerial power and managerial rent extraction.
Abstract Format
html
Language
English
Format
Accession Number
TU21209
Shelf Location
Archives, The Learning Commons, 12F, Henry Sy Sr. Hall
Physical Description
95, [70] leaves ; 28 cm. + 1 computer disc ; 4 3/4 in.
Keywords
Corporate governance--Philippines; Employee stock options--Philippines; Stock options--Philippines
Recommended Citation
Del Ayre, K., Guasa, C., Relucio, C., & Tan, M. V. (2008). Assessing the effect of executive stock option plans on agency costs and risk-taking behavior of managers in listed firms for the years 2002-2006. Retrieved from https://animorepository.dlsu.edu.ph/etd_bachelors/7156