Chen, J orcid.org/0000-0002-4076-7121, Leung, WS, Song, W et al. (1 more author) (2023) Does CDS trading affect risk-taking incentives in managerial compensation? Journal of Banking & Finance, 151. 105485. ISSN 0378-4266
Abstract
We find that managers receive more risk-taking incentives in their compensation packages once their firms are referenced by credit default swap (CDS) trading, particularly when institutional ownership is high and when firms are in financial distress. These findings provide suggestive evidence that boards offer pay packages that encourage greater risk taking to take advantage of the reduced creditor monitoring after CDS introduction. Further, we show that the onset of CDS trading attenuates the effect of vega on leverage, consistent with the threat of exacting creditors restraining managerial risk appetite.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2019 Published by Elsevier B.V. This is an author produced version of a paper published in Journal of Banking & Finance. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Credit default swaps; Executive compensation; Risk taking; Leverage JEL classification:; G32; G34 |
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: | 11 Jan 2019 16:25 |
Last Modified: | 18 Oct 2024 14:25 |
Status: | Published |
Publisher: | Elsevier |
Identification Number: | 10.1016/j.jbankfin.2019.01.004 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:140825 |