Plausibly Exogenous [1217] - Corporate Risk-taking (06/02/2023)

LHS Variable
Corporate risk-taking

RHS Variable
Incentive structure

Source of Exogenous Variation
Jump in tail risk that is created when a chemical to which a firm's workers have already been exposed is newly identified as a carcinogen. Discovery of a chemical's carcinogenicity increases the likelihood that a firm will need to spend large sums on legal fees, damage payments, and insurance premiums in the future

- Gormley, Matsa, and Milbourn (2013), “CEO compensation and corporate risk: Evidence from a natural experiment”