Seeking safety: The relation between CEO inside debt holdings and the riskiness of firm investment and financial policies

• 成果类型: Article
• 署名作者: Cassell, Cory A.; Huang, Shawn X.; Sanchez, Juan Manuel; Stuart, Michael D.
• 署名单位: University of Arkansas System; University of Arkansas Fayetteville
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.10.008
• 发表日期: 2012
• 页码: 588-610
• 关键词: Inside debt; pensions; Deferred compensation; ceo incentives; Risk-seeking behavior

摘要

CEO inside debt holdings (pension benefits and deferred compensation) are generally unsecured and unfunded liabilities of the firm. Because these characteristics of inside debt expose the CEO to default risk similar to that faced by outside creditors, theory predicts that CEOs with large inside debt holdings will display lower levels of risk-seeking behavior (Jensen and Meckling, 1976). Consistent with the theoretical predictions, we find a negative association between CEO inside debt holdings and the volatility of future firm stock returns, R&D expenditures, and financial leverage, and a positive association between CEO inside debt holdings and the extent of diversification and asset liquidity. Collectively, our results provide empirical evidence suggesting that CEOs with large inside debt holdings prefer investment and financial policies that are less risky. (C) 2011 Elsevier B.V. All rights reserved.