Systems of managerial incentive and the risk of firms in the State of Espirito Santo

Abstract

This study aimed to verify the relation between the level of risk the firm undergoes and managerial incentives offered to the managers of said firms. This idea was based on the Agency Theory that predicts that the firms, when offering systems of managerial incentives, tend achieve an alignment of interests between agents. In this manner, it is expected that the managers do not take higher level risk than those accepted by stockholders. Therefore, risks attributed to the firms would be associated with the presence of the incentives offered to their managers. This is an empirical analysis with a sample composed by the firms ranked among the 200 largest firms of the State of Espírito Santo, released by a regional magazine Findes, in 2008. The data were collection occurred during the period of May to December 2009, through interviews in loco, and with the application of a semi-structured questionnaire to identify the firms that adopted systems of managerial incentive, and to extract the variables applied to the logistic regression model. The acquired results provided evidence that there is no relation between the level of risk the firms take and the systems incentive offered to their managers.