Abstract:We investigate the relationship between CEO risk incentives and the innovation premium (IP) proposed by Forbes. We suggest that compared to traditional proxies of innovation, the IP is a comprehensive measure of a firm's overall innovation and, therefore, can measure innovation effectiveness in broader industries. We find that both option vega and vega‐to‐delta ratio, as measures of CEO risk incentives, have a positive relationship with the IP. Additional tests reveal that the traditional patent‐related output… Show more
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