Leverage Choice and Credit Spreads when Managers Risk Shift

• 成果类型: Article
• 署名作者: Carlson, Murray; Lazrak, Ali
• 署名单位: University of British Columbia; Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2010.01617.x
• 发表日期: 2010
• 页码: 2323-2362
• 关键词: dynamic capital structure; corporate governance; ceo turnover; asset prices; AGENCY COSTS; debt; COMPENSATION; decisions; return; equilibrium

摘要

We model the debt and asset risk choice of a manager with performance-insensitive pay (cash) and performance-sensitive pay (stock) to theoretically link compensation structure, leverage, and credit spreads. The model predicts that optimal leverage trades off the tax benefit of debt against the utility cost of ex-post asset substitution and that credit spreads are increasing in the ratio of cash-to-stock. Using a large cross-section of U.S.-based corporate credit default swaps (CDS) covering 2001 to 2006, we find a positive association between cash-to-stock and CDS rates, and between cash-to-stock and leverage ratios.