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dc.contributor.authorTchistyi, Alexei
dc.contributor.authorYermack, David
dc.contributor.authorYun, Hayong
dc.date.accessioned2020-11-12T19:47:58Z
dc.date.available2020-11-12T19:47:58Z
dc.date.issued2009-01-01
dc.identifier.other1041170
dc.identifier.urihttps://hdl.handle.net/1813/73198
dc.description.abstractWe examine the relation between CEOs’ equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distress while making a firm riskier to the benefit of option holders. We find that managers whose compensation is more sensitive to stock volatility choose steeper and more convex performance pricing schedules, while those with high delta incentives choose flatter, less convex pricing schedules. Performance pricing contracts therefore seem to provide a channel for managers to increase firms’ financial risk to gain private benefits.
dc.language.isoen_US
dc.subjectperformance sensitive debt
dc.subjectequity compensation
dc.titleNegative Hedging: Performance Sensitive Debt and CEOs’ Equity Incentives (CRI 2009-014)
dc.typepreprint
dc.description.legacydownloadscri_2009_014.pdf: 436 downloads, before Oct. 1, 2020.
local.authorAffiliationTchistyi, Alexei: University of California - Berkeley
local.authorAffiliationYermack, David: New York University
local.authorAffiliationYun, Hayong: University of Notre Dame


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