Managerial Ownership of Debt and Bank Loan Contracting
Debt ownership by equity-holding managers aligns their incentives more closely with those of creditors, thereby reducing agency costs of debt (Jensen and Meckling (1976) and Edmans and Liu (2010)). We test and find strong support for this hypothesis by examining how terms of bank loans are related to executive pension and deferred compensation, which are debt-like claims held by managers against their own firms. Specifically, our analysis uncovers significant evidence of lower loan spreads for firms with larger debt ownership by CEOs in the form of pension benefits and deferred compensation. The negative relation is more pronounced when creditors face higher expropriation risk and when the CEOs expected retirement horizon is beyond loan maturity. We also find that loans to firms with larger managerial debt holdings are associated with smaller lending syndicates, fewer covenant restrictions, and less collateral requirement, consistent with lenders anticipating lower expropriation risk at these firms.
Cong Wang Fei Xie Xiangang Xin
Chinese University of Hong Kong George Mason University
国际会议
Third Shanghai Winter Finance Conference(第三届上海冬季金融研讨会)
上海
英文
1-43
2010-12-18（万方平台首次上网日期，不代表论文的发表时间）