Srivastav, A orcid.org/0000-0003-4831-4458, Armitage, S, Hagendorff, J et al. (1 more author) (2018) Better safe than sorry? CEO inside debt and risk-taking in bank acquisitions. Journal of Financial Stability, 36. pp. 208-224. ISSN 1572-3089
Abstract
Widespread bank losses during the financial crisis have raised concerns that equity-based compensation for bank CEOs causes excessive risk-taking. Debt-based compensation, so-called inside debt, aligns the interests of CEOs with those of external creditors. We examine whether inside debt induces CEOs to pursue less risky acquisitions. Consistent with this, we show that acquisitions announced by CEOs with high inside debt incentives are associated with a wealth transfer from equity to debt holders. After the completion of a deal, banks where acquiring CEOs have high inside debt incentives display lower market measures of risk and lower loss exposures for taxpayers.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2018 Elsevier B.V. This is an author produced version of a paper published in Journal of Financial Stability. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Banks; Inside debt; CEO incentives; Mergers and acquisitions |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 10 Apr 2018 10:53 |
Last Modified: | 09 Oct 2019 00:38 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.jfs.2018.04.005 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:129421 |