Behavioral responses of CEOs to stock ownership and stock option pay

Executive stock ownership and stock option pay are often assumed to have co ngruent incentive effects; however, these incentives have asymmetrical risk properties, and executives may respond to them in different ways. This stu dy, which examined the effects of ownership and option pay, showed that the y had diametrically opposite effects on firms' acquisition and divestiture propensity. Moreover, situational characteristics moderated the risk-seekin g behavior associated with stock option pay but not the risk aversion assoc iated with ownership.