期刊名称：Bank of Finland Research Discussion Papers (früher: Bank of Finland Discussion Papers)
印刷版ISSN：0785-3572
电子版ISSN：1456-6184
出版年度：2011
卷号：2011
出版社：Suomen Pankki = Bank of Finland
摘要：This paper investigates the potential effects of stock options on managers’
investment decisions and therefore on a firm’s growth or, alternatively, on its
leverage-growth relationship. To structure the analysis addressing this issue, the
paper utilizes a framework establishing a negative relationship between leverage
and the firm’s growth. However, in contrast to some of the existing results, the
empirical analysis of manufacturing firms in this paper shows that the negative
relationship between leverage and growth has changed significantly. Primarily
this paper documents that, as options based compensation in manager’s portfolio
increases, the negative effect of leverage on growth disappears. The paper argues
that this is an important finding, because it implies that when managers are
compensated with options debt ceases to pre-commit managers. On addressing the
potential endogeneity problem between leverage, growth and compensation the
paper finds that option delta instead of book leverage negatively affects growth,
and that book leverage and option delta are inversely related. Finally, the paper
also examines the effect of corporate governance on the relationship between
leverage, incentives and the firm’s growth and finds that leverage is negatively
related to growth only in poorly governed firms.
