Are banks happy when managers go long? The information content of managers' vested option holdings for loan pricing

• 成果类型: Article
• 署名作者: Dezso, Cristian L.; Ross, David Gaddis
• 署名单位: Columbia University; University System of Maryland; University of Maryland College Park
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.06.002
• 发表日期: 2012
• 页码: 395-410
• 关键词: Credit quality; Executive compensation; Loan pricing; options; volatility

摘要

While traditional finance theory holds that managers with option-laden incentive contracts may favor equity at the expense of debt, a risk-averse manager may be more likely to retain vested in-the-money options if the manager has private information that the firm's risk-adjusted performance will be better. It follows that vested option holdings should be positively associated with credit quality. In support of this, we find that vested option holdings have a strong negative association with loan pricing, especially for informationally sensitive loans, and also predict higher cash flows and credit ratings, a greater distance to default, and lower equity volatility. (C) 2012 Elsevier B.V. All rights reserved.