The Incentives of Creditors to Monitor Via Debt Concentration: The Impact of CEO Compensation Structure and Horizon

Castro, Paula; Keasey, Kevin; Tapia, Borja Amor; Fernández, María Teresa Tascón; Vallascas, Francesco

doi:10.2139/ssrn.2805004

SSRN Journal

2016

DOI: 10.2139/ssrn.2805004

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The Incentives of Creditors to Monitor Via Debt Concentration: The Impact of CEO Compensation Structure and Horizon

Paula Castro

Kevin Keasey

Borja Amor Tapia

et al.

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“…Further,Brockman et al (2010) document a positive relation between CEO vega and short-term debt, implying that creditors adjust debt maturity to restrain managerial risk seeking in response to an increase in CEO vega. In a similar vein,Castro et al (2016) find that an increase in CEO vega leads to a greater concentration of the firm's debt structure. More concentrated debt structures facilitate creditor monitoring by mitigating free-rider and coordination problems(Diamond, 1991;Sufi, 2007).…”

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Does CDS Trading Affect Risk-Taking Incentives in Managerial Compensation?

et al. 2019

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We find that managers receive more risk-taking incentives in their compensation packages once their firms are referenced by credit default swap (CDS) trading, particularly when institutional ownership is high and when firms are in financial distress. These findings provide suggestive evidence that boards offer pay packages that encourage greater risk taking to take advantage of the reduced creditor monitoring after CDS introduction. Further, we show that the onset of CDS trading attenuates the effect of vega on leverage, consistent with the threat of exacting creditors restraining managerial risk appetite.

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Does CDS Trading Affect Risk-Taking Incentives in Managerial Compensation?

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The Incentives of Creditors to Monitor Via Debt Concentration: The Impact of CEO Compensation Structure and Horizon

Cited by 1 publication

References 52 publications

Does CDS Trading Affect Risk-Taking Incentives in Managerial Compensation?

Does CDS Trading Affect Risk-Taking Incentives in Managerial Compensation?

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