| In chapter 1, we examine the timing of executive stock option awards to investigate the influence of corporate managers over the terms of their own compensation. In a sample of 11,219 stock option awards to CEOs in 2,129 companies between 1992 and 2000, we find an average cumulative abnormal return of −2.42% during 60 trading days before CEOs receive option grants and an average cumulative abnormal return of 3.75% in 90 trading days following the option grants. With a cross-sectional analysis of the abnormal returns, we also find that the CEOs of companies with smaller size, bigger option grants (number of options awarded), higher stock price volatility, and a more flexible schedule in granting option awards, consistently benefit from more favorable timing of their option awards.; In chapter 2, we study managerial incentive contracts and capital structure choices that maximize the value of the firm when CEOs are risk averse. We do this by proposing a theory which demonstrates that increasing the pay-for-performance sensitivity of the manager's compensation contract does not always increase the incentives of the manager to increase project risk. This result is contrary to previous belief that higher levels of equity compensation should cause the manager to risk-shift. We test our model using a sample of 909 publicly-traded manufacturing firms over the 1992–1998 period and confirm the main implications of our theory.; In chapter 3, I analyze stock option awards to CEOs of 1,992 U.S. public companies from 1993 to 2000. Measuring the pay-for-performance sensitivity of stock options based on stock-options awarded during each fiscal year, the “flow”, and the stock-options awarded during previous years, the “stock”, I performed tests to see whether stock options' performance incentives have significant association with explanatory variables related to agency cost reduction.; In chapter 4, we consider the unexpected share price reaction to corporate news announcements. We first consider whether there is more information content in similar corporate news announcements for different types of firms. Second, we investigate whether the value of news information about these firms has declined over time using a variety of empirical methods. We use 31 years of data on corporate dividend announcements, stock split announcements, and earnings announcements for a large set of U.S. firms to investigate these topics. The investigation of the entire distributions of returns using kernel density estimators rejects the “news is no longer newsworthy” idea. |
