Published in:31st Australasian Finance and Banking Conference 2018
Extent:
1 Online-Ressource (45 p)
Language:
English
DOI:
10.2139/ssrn.3217176
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments February 1, 2017 erstellt
Description:
What is the role of creditors in shaping the design of risk-taking incentives in managerial compensation? This paper provides empirical evidence by investigating how the trading of credit default swaps (CDS) shapes the design of CDS-referenced firm's managerial compen- sation, especially its risk-taking incentives. We find that CEO compensation vega increases significantly when a firm has CDS referring its debt, and the causal relationship is verified by a set of endogeneity tests. The CDS effect is stronger for firms with larger risk-shifting agency conflict and lower bankruptcy risk, consistent with the view that the alleviation of creditors' risk concerns is the main mechanism driving this effect