CEO stock option pay and risk‐taking investment in the hospitality industry: The moderating effects of situational factors.

Based upon behavioral perspective and agency theory, this paper attempts to investigate the effect of CEO stock option pay on firms' risk‐taking investments in the restaurant sector. Specifically, this paper proposes that option‐loaded CEOs tend to make risky investments. In addition, we investigate how the prior stock performance of a firm and its CEOs' characteristics moderate this relationship. The findings of this paper show that option‐loaded CEOs are more likely to engage in risk‐taking investments. However, this positive main relationship is diminished when a firm has a good prior stock performance, when a CEO has a longer tenure, and when he or she becomes aged. Given the lack of empirical literature that explores the corporate governance in the hospitality literature, this study adds value to the existing research by further investigating the effect of CEO stock option pay scheme on restaurant firms' risk‐taking behavior. [ABSTRACT FROM AUTHOR]