We find that firms that grant performance-contingent (p-c) equity awards with accounting-based vesting conditions to their CEOs have lower cost of debt and less restrictive loan terms. The benefits of p-c accounting-based awards on debt financing are greater when the moral hazard problem faced by debtholders is potentially more significant—for example, for firms with poorer credit ratings and lower asset tangibility. We find some evidence that certain types of p-c equity awards with stock price-based conditions increase the cost of debt financing. The adoption of p-c accounting-based awards increases firm value, as indicated by stock and bond event studies. Overall, our findings suggest that the incentive compatibility of accounting-based p-c awards mitigates the potential agency conflict between shareholders and debtholders.

Using establishment-level data, we show that COVID-19 vaccinations boost business activity and firm performance in the United States. A 10-percent increase in vaccination rates results in a 4-percent to 6-percent increase in customer visits. We document the channels through which vaccinations increase store visits and the limits to the effect of vaccines on business activity. At the firm level, vaccinations increase sales and earnings, impact expansion decisions, and decrease probability of default, but the benefits vary across businesses. Vaccinations create private economic benefits to firms, shareholders, and employees, in addition to their intended public health benefits.