TY - JOUR
T1 - CEO Overconfidence and the Effects of Equity-Based Compensation on Strategic Risk-Taking in the U.S. Restaurant Industry
AU - Seo, Kwanglim
AU - Sharma, Amit
PY - 2018/2/1
Y1 - 2018/2/1
N2 - The purpose of this study was to investigate (a) the moderating effect of CEO overconfidence on the relationship between equity-based compensation and strategic risk-taking and (b) the relationship between franchising and strategic risk-taking in the U.S. restaurant industry. Given wide use of a franchise system among U.S. restaurant firms, an understanding of the association between equity-based compensation and strategic risk-taking relative to CEOs’ risk behaviors seems particularly important. We conducted our empirical analysis in the U.S. restaurant industry using a sample of 659 firm-year observations from 1992 to 2013. Our findings showed that (a) overconfident CEOs, while holding equity-based compensation, tended to take on more strategically risky investments, and (b) there was a positive relation between franchising and risk-taking. Considering the behavioral and industry-specific characteristics, study findings could provide a more comprehensive understanding of how equity-based compensation influences strategic risk-taking in the U.S. restaurant industry.
AB - The purpose of this study was to investigate (a) the moderating effect of CEO overconfidence on the relationship between equity-based compensation and strategic risk-taking and (b) the relationship between franchising and strategic risk-taking in the U.S. restaurant industry. Given wide use of a franchise system among U.S. restaurant firms, an understanding of the association between equity-based compensation and strategic risk-taking relative to CEOs’ risk behaviors seems particularly important. We conducted our empirical analysis in the U.S. restaurant industry using a sample of 659 firm-year observations from 1992 to 2013. Our findings showed that (a) overconfident CEOs, while holding equity-based compensation, tended to take on more strategically risky investments, and (b) there was a positive relation between franchising and risk-taking. Considering the behavioral and industry-specific characteristics, study findings could provide a more comprehensive understanding of how equity-based compensation influences strategic risk-taking in the U.S. restaurant industry.
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U2 - 10.1177/1096348014561026
DO - 10.1177/1096348014561026
M3 - Article
AN - SCOPUS:85040201114
SN - 1096-3480
VL - 42
SP - 224
EP - 259
JO - Journal of Hospitality and Tourism Research
JF - Journal of Hospitality and Tourism Research
IS - 2
ER -