University of Illinois Urbana-Champaign

Managerial risk-taking incentives and state economic growth

Yoon, Ha Young

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YOON-DISSERTATION-2019.pdf

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

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
Date of Ingest
2019-08-23T20:44:39Z
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
Permalink
http://hdl.handle.net/2142/105165
Copyright and License Information
Copyright 2019 Ha Young Yoon

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