Managerial Incentives, Dividend Policy and Risk-Taking.

• Main Authors: Jen-Shin Chen, 陳仁信
• Other Authors: Yu-Shun Hung
• Format: Others
• Language: zh-TW
• Published: 2008
• Online Access: http://ndltd.ncl.edu.tw/handle/95235691139138067318

碩士 === 淡江大學 === 會計學系碩士班 === 96 === Prior studies consider how agency problems influence managerial investment decisions. Agency problems could lead managers either into overinvestment or underinvestment. In addition, some empirical studies have investigated the impact of managerial incentive compensation or dividend policy on agency problems of investment respectively. However, managerial incentive compensation and dividend policy may jointly improve investment agency problems and thus, this study deeply investigates their relationship. Specifically, the main purpose of this study is to explore the governance implications of a firm’s CEO stock options and dividend decision in controlling overinvestment and underinvestment problem. In this study, we address the potentially endogenous relation among investment decision, managerial incentive compensation, and dividend policy by estimating a three-stage least squares regression model. To distinguish between the overinvestment and underinvestment, we subdivide the sample by Tobin’s Q (Koch and Shenoy, 1999; Denis, Denis, and Sarin, 1994; Broussard, Buchenroth, and Pilotte, 2004). The empirical results suggest that CEO stock options and dividend policy can mitigate a firm’s overinvestment and underinvestment problem. Moreover, we investigate the relationship between CEO stock options and dividend policy in dealing with overinvestment and underinvestment problem. We find that CEO stock options and dividend policy are negatively associated with each other, indicating they act as substitute-monitoring forces for overinvestment problem. We also find that CEO stock options and dividend policy are positively related with each other, indicating they act as complements in alleviating the underinvestment problem.