Executive valuation of simple compensation packages: Risk aversion, leverage and volatility

Heaney, R 2005, 'Executive valuation of simple compensation packages: Risk aversion, leverage and volatility', Managerial Finance, vol. 31, no. 7, pp. 91-108.


Document type: Journal Article
Collection: Journal Articles

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Title Executive valuation of simple compensation packages: Risk aversion, leverage and volatility
Author(s) Heaney, R
Year 2005
Journal name Managerial Finance
Volume number 31
Issue number 7
Start page 91
End page 108
Total pages 17
Publisher Emerald Group Publishing
Abstract This paper analyses the value to a poorly diversified risk-averse executive of a compensation package consisting of a risk free asset, restricted stock and stock options. The Lambert, Larcker and Verrecchia (1991) model is extended to include leverage and this facilitates comparison of cost to the firm and benefits to the executive of restricted stock and stock options. It also provides insight into the impact of executive risk aversion, firm leverage and underlying as set volatility on the value of a compensation package in the hands of the executive.
Subject Financial Economics
Keyword(s) compensation
executive
leverage
risk-aversion
stock
stock-options
volatility
DOI - identifier 10.1108/03074350510769767
Copyright notice © Barmarick Publications
ISSN 0307-4358
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