Executive Compensation and the Cost of Debt

Rezaul Kabir; Hao Liu; Yulia V. Veld-Merkoulova

doi:10.1016/j.jbankfin.2013.04.020

Executive Compensation and the Cost of Debt

Rezaul Kabir, Hao Liu, Yulia V. Veld-Merkoulova

Faculty of Behavioural, Management and Social Sciences

Research output: Contribution to journal › Article › Academic › peer-review

58 Citations (Scopus)

24 Downloads (Pure)

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

Original language	English
Pages (from-to)	2893-2907
Journal	Journal of banking & finance
Volume	37
Issue number	8
DOIs	https://doi.org/10.1016/j.jbankfin.2013.04.020
Publication status	Published - 1 Feb 2013

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10.1016/j.jbankfin.2013.04.020

58 Citations
2 Paper

Executive Compensation and the Cost of Debt
Kabir, R., Liu, H. & Veld-Merkoulova, Y. V., 9 May 2012.
Research output: Contribution to conference › Paper
Executive Compensation and the Cost of Debt
Kabir, M. R., Li, H. & Veld-Merkoulova, Y. V., 7 Apr 2010. 36 p.
Research output: Contribution to conference › Paper

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title = "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",

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AB - 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

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Executive Compensation and the Cost of Debt

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