Managerial risk-taking incentives and state economic growth

Yoon, Ha Young

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https://hdl.handle.net/2142/105165 Copy

Description

Title

Managerial risk-taking incentives and state economic growth

Author(s)

Yoon, Ha Young

Issue Date

2019-04-08

Director of Research (if dissertation) or Advisor (if thesis)

Urcan, Oktay

Doctoral Committee Chair(s)

Urcan, Oktay

Committee Member(s)

• Almeida, Heitor
• Li, Laura Y
• Sougiannis, Theodore

Department of Study

Accountancy

Discipline

Accountancy

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

Ph.D.

Degree Level

Dissertation

Keyword(s)

• Risk-taking incentives
• Aggregate
• State-level economic growth

Abstract

Using U.S. state-level data between 1993 and 2015, this paper examines whether aggregate executive risk-taking incentives are related to future state economic growth. I find evidence that an increase in state-level aggregate risk-taking incentives is predictably associated with a lower future state economic growth, after controlling for the effect of aggregate pay-for-performance sensitivity. This result is robust to a battery of tests conducted to address concerns related to correlated omitted variables, reverse causality, and measurement errors. Consistent with the theory which posits that lenders’ screening is countercyclical, the negative relation is more pronounced during economic expansions and when credit supply is likely to be abundant. Further, subsequent total bank loan charge-offs are greater in states with high aggregate risk-taking incentives and a high level of credit supply. M&As consummated in states with both high aggregate risk-taking incentives and a high level of credit supply perform significantly worse than others. Finally, an examination of possible channels reveals that state-level growth in risk-taking incentives is associated with an increase in riskier corporate activities at the aggregate level.

Graduation Semester

2019-05

Type of Resource

text

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http://hdl.handle.net/2142/105165

Copyright and License Information

Copyright 2019 Ha Young Yoon

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