CEO stock options and gender from the behavioral agency model perspective: Implications for risk and performance

PurposeThe purpose of this paper is to provide an extension of the behavioral agency model (BAM) by focusing on the moderating role of CEO gender on the relationship between CEO stock options and risk “systematic vs idiosyncratic” and the performance consequences “positive vs negative” of these opti...

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Bibliographic Details
Published in:Management research (Armonk, N.Y.) N.Y.), 2019-04, Vol.17 (1), p.68-88
Main Authors: Gomez-Mejia, Luis, Baixauli-Soler, J. Samuel, Belda-Ruiz, Maria, Sanchez-Marin, Gregorio
Format: Article
Language:English
Subjects:
Behavior
Chief executive officers
Decision making
Demography
Economic models
Executives
Females
Gender differences
Hypotheses
Incentives
Influence
Stock options
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Summary:PurposeThe purpose of this paper is to provide an extension of the behavioral agency model (BAM) by focusing on the moderating role of CEO gender on the relationship between CEO stock options and risk “systematic vs idiosyncratic” and the performance consequences “positive vs negative” of these option incentives.Design/methodology/approachData on CEO’s stock option portfolios are collected from the Standard & Poor’s (S&P’s) ExecuComp. This paper uses a panel data analysis for matched samples of CEOs in S&P’s 1,500 listed firms over the period 2006-2013.FindingsThe results indicate a more conservative, risk-averse posture in the case of female CEOs than for male CEOs when they are compensated with stock options for idiosyncratic (firm-specific) risk. The results also confirm that female CEOs in low systematic risk contexts, although more conservative, take more prudent risks that produce better long-term outcomes as compared to their male counterparts.Practical implicationsImportant implications for the design of optimal CEO’s compensation packages emanate from this study. Findings provide useful tools for board of directors to design CEO’s pay packages that take into account the different risk behavior of male and female CEOs with the aim of enhancing firm performance.Originality/valueThis paper provides new evidence within the area of stock option-based compensation by focusing on the distinction between systematic and idiosyncratic risk when the effect of CEO stock option is analyzed and performance implications of awarding options to male and female CEOs.
ISSN:1536-5433
1558-0946
DOI:10.1108/MRJIAM-05-2018-0836