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An executive hierarchy analysis of stock options: Does gender matter?

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Abstract

This study takes a step forward in addressing the influence of stock options on executive risk-taking behavior, examining the moderating role of the executive hierarchy—CEOs versus non-CEO executives—and the gender effect within these corporate positions. Panel data analysis for matched samples of S&P 1500 listed firms between 2006 and 2011 confirms both hierarchical and gender differences in the relationship between executive stock options (ESOs) and risk taking. The maximum wealth at risk at which risk-increasing behavior changes to risk-reducing behavior—in the inverted U-shaped relationship—is higher for CEOs than for non-CEO executives, while gender differences in the ESO risk-taking effect are stronger at the level of CEOs. Thus, our evidence shows the importance of considering executive’s decision-making freedom (by means of hierarchy) in order to predict risk preferences according to executive gender.

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Notes

  1. We consider fiscal years used in ExecuComp. ExecuComp follows the Compustat years in which years ending from June of one year through May of the following year. Thus, time period analyzed in this study ranges from June 2006 to May 2012.

  2. The National Bureau of Economic Research identifies the crisis peak from December 2007 to June 2009, which corresponds to 2007 and 2008 fiscal years.

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Acknowledgments

We are grateful for the excellent suggestions of Luis R. Gomez-Mejia, Ruth Mateos de Cabo, Brian G.M. Main and the seminar participants at the Adam Smith Business School, University of Glasgow. Also, we thank comments from participants in the 24th Annual Meeting of the European Financial Management Association and the 23rd Finance Forum of the Spanish Association of Finance. Financial support from the Spanish Government under the FPU program of the Ministry of Education, Ministry of Economy and Competitiveness (ECO2014-54301-P) and Fundación Cajamurcia (Spain) is acknowledged.

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Authors and Affiliations

  1. Department of Management and Finance, Faculty of Economics and Business, University of Murcia, Campus de Espinardo, 30100, Murcia, Spain

    J. Samuel Baixauli-Soler & Gregorio Sanchez-Marin

  2. Department of Business Administration, Catholic University of Murcia, Campus de los Jerónimos, Guadalupe, 30107, Murcia, Spain

    Maria Belda-Ruiz

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  1. J. Samuel Baixauli-Soler
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Correspondence to Gregorio Sanchez-Marin.

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Baixauli-Soler, J.S., Belda-Ruiz, M. & Sanchez-Marin, G. An executive hierarchy analysis of stock options: Does gender matter? . Rev Manag Sci 11, 737–766 (2017). https://doi.org/10.1007/s11846-016-0202-3

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