Colonnello, Stefano
[Verfasser:in]
;
Curatola, Giuliano
[Sonstige Person, Familie und Körperschaft];
Hoang, Ngoc Giang
[Sonstige Person, Familie und Körperschaft]
Direct and Indirect Risk-Taking Incentives of Inside Debt
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 14, 2016 erstellt
Beschreibung:
We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about the relation between credit spreads and different compensation components. First, we show that credit spreads are decreasing in inside debt only if it is unsecured. Second, the relation between credit spreads and equity incentives varies depending on the features of inside debt. We show that credit spreads are increasing in equity incentives. This relation becomes stronger as the seniority of inside debt increases. Using a sample of U.S. public firms with traded credit default swap contracts, we provide evidence supportive of the model's predictions