# kaal:claim:2957645-023

**Claim.** Where conversion has a negative effect on stock price, management is further incentivized to maintain and manage risk in order to avoid reputational loss and the income reduction caused by losses in stock options.

**Type.** mechanism  **Support.** argued

**Holds when.**

- conversion depresses the issuer's stock price
- management compensation includes stock options

**Source quote.**

> In situations where conversion had a negative effect on stock price,49 management could be incentivized further to maintain and manage risk to avoid reputational loss and income reduction due to losses in stock

**From.** Kaal, *Dynamic Regulation via Contingent Capital* (2017), III. Contingent Capital, page 13

**Cite as.** Kaal, Dynamic Regulation via Contingent Capital (2017). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2957645

**Verify.** sha256 of source PDF `250b10782a5ea5dece9235a7f711aee408feaf36f2e78e310d589b5ee6304be2` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202017%20-%20Dynamic%20Regulation%20via%20Contingent%20Capital.pdf

**Topics.** corporate-governance, risk-and-incentives, contingent-capital

**Keywords.** executive-compensation, stock-options, risk-management, contingent-capital

**Related claims.**

- extends: https://wulfkaal.github.io/claims/2097160-025

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