Journal of Banking & Finance Vol. 37 No. 8 2013
Executive compensation and the cost of debt
Abstract
This study examines how different components of executive compensation affect the cost of debt. We find that debt-like and equity-like pay components have differing effects: an increase in defined benefit pensions is associated with lower bond yield spread, while higher share holdings lead to higher spreads. In addition, we find that stock options have a mixed impact on the cost of debt whereas cash bonus has no significant impact. Overall, our results indicate that corporate bondholders are fully aware of both risk-taking and risk-avoiding incentives created by various executive pay components.
- DOI
- 10.1016/j.jbankfin.2013.04.020
- Volume
- 37
- Issue
- 8
- Pages
- 2893-2907
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib