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Keywords:

  • agency theory;
  • corporate acquisition strategies;
  • firm risk taking;
  • acquisition performance

Abstract

In this study, we examine in an agency-theoretic context the influence of executive equity stakes upon corporate strategy and firm value. We argue that beneficial, risk-increasing corporate strategies may initially be emphasized but non-value-maximizing, risk-reducing strategies may subsequently be emphasized as managers expand their stock ownership. We alternatively contend that stock options may have a consistently positive impact on firm risk taking and acquisition returns. The empirical findings are supportive of our expectations. Copyright © 2002 John Wiley & Sons, Ltd.