Executive compensation structure and credit spreads : [Version 9 Juli 2014]
- We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about how inside debt features affect the relation between credit spreads and compensation components. First, inside debt reduces credit spreads only if it is unsecured. Second, inside debt exerts important indirect effects on the role of equity incentives: When inside debt is large and unsecured, equity incentives increase credit spreads; When inside debt is small or secured, this effect is weakened or reversed. We test our model on a sample of U.S. public firms with traded CDS contracts, finding evidence supportive of our predictions. To alleviate endogeneity concerns, we also show that our results are robust to using an instrumental variable approach.
| Author: | Stefano Colonnello, Giuliano Curatola, Ngoc Giang Hoang |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-344536 |
| URL: | http://ssrn.com/abstract=2464430 |
| Parent Title (German): | SAFE working paper series ; No. 60 |
| Series (Serial Number): | SAFE working paper (60) |
| Publisher: | SAFE |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2014 |
| Year of first Publication: | 2014 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2014/07/14 |
| Tag: | Business Cycle; Compensation Structure; Credit Spread; Inside Debt; Risk-Taking |
| Issue: | Version 9 Juli 2014 |
| Page Number: | 74 |
| HeBIS-PPN: | 34892898X |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF) | |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
