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Stockholder and Bondholder Reactions To Revelations of Large CEO Inside Debt Holdings: An Empirical Analysis (CRI 2009-005)

Author
Wei, Chenyang; Yermack, David
Abstract
We conduct an event study of stockholders’ and bondholders’ reactions to companies’ initial reports of their CEOs’ inside debt positions, as required by SEC disclosure regulations that became effective early in 2007. Results show that bond prices rise, equity prices fall, and the volatility of both securities drops at the time of disclosures by firms whose CEOs have sizeable pensions or deferred compensation. The results indicate a transfer of value from equity toward debt, as well as an overall destruction of enterprise value, when a CEO’s inside debt holdings are large.
Date Issued
2009-09-01Subject
deferred compensation; inside debt; executive compensation disclosure
Type
preprint