University of Illinois Urbana-Champaign

Nonfinancial performance measures and risk-taking: evidence from the oil and gas industry

Kim, Minjeong

Content Files
KIM-DISSERTATION-2021.pdf

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https://hdl.handle.net/2142/110657

Description

Title
Nonfinancial performance measures and risk-taking: evidence from the oil and gas industry
Author(s)
Kim, Minjeong
Issue Date
2021-04-13
Director of Research (if dissertation) or Advisor (if thesis)
Chen, Clara
Doctoral Committee Chair(s)
Chen, Clara
Committee Member(s)
  • Brown, Nerissa
  • Du, Fei
  • Li, Laura
  • Irani, Rustom
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
2021-09-17T02:34:24Z
Keyword(s)
  • Risk-taking
  • executive compensation
  • nonfinancial performance measure
Abstract
This study examines the relation between nonfinancial performance measures (NFPMs) and firms’ risk-taking using CEO compensation contracts in the oil and gas industry (SIC 1311). The oil and gas industry provides an ideal setting for my study because firms in this industry are required to disclose detailed information about their risk activities, which allows me to develop empirical measures for firm risk-taking behavior. I find NFPMs that incentivize risk-taking are effective. More importantly, I find that firms with these NFPMs also invest in more low-risk activities and achieve better short-term financial performance compared to other firms. These results are consistent with my hypothesis that explicit incentives to invest in risky projects induce risk averse managers to manage the associated downside risk of failure by allocating limited resources across other low-risk projects. My findings shed light on how NFPMs can potentially complement equity-based incentives and financial accounting measures to direct and motivate managers to take on risky projects as well as better manage firm performance.
Graduation Semester
2021-05
Type of Resource
Thesis
Permalink
http://hdl.handle.net/2142/110657
Copyright and License Information
Copyright 2021 Minjeong Kim

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