Shareholder litigation and the risk incentive effect of executive compensation: A re-examination

Isarin Durongkadej, Siqi Wei and Ramesh Rao ()

Finance Research Letters, 2021, vol. 41, issue C

Abstract: Previous literature shows that securities litigation is positively impacted by management compensation with a focus on the delta, but not the vega, component of compensation. We argue that the vega, rather than the delta, component of management compensation should be associated with litigation propensity. Using a sample from 1996 to 2018, we document that securities litigation is related to option vega but not to delta. Our results are robust to alternate specifications of delta and vega, and to endogeneity concerns from reverse causality.

Keywords: Securities litigation; management incentives; securities fraud; option compensation (search for similar items in EconPapers)
JEL-codes: G30 G34 J33 K22 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:41:y:2021:i:c:s1544612320316044

DOI: 10.1016/j.frl.2020.101790

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