Question 11.RQ.1: How might the directors’ attitude towards risk be affected b...

The directors’ attitude towards risk may be affected by the availability of share options in different ways. Where, for example, the options are ‘out of the money’, the directors may engage in risky behaviour in order to increase the price of the shares. Where, however, the directors are holding much of their personal wealth in the form of share options, they may seek to avoid risk. In both examples, the directors’ personal interests would prevail over the interests of shareholders.