Abstract
This paper examines the influence of debt specialisation on executive compensation. We document evidence of a positive relationship between debt specialisation and executive compensation. In other words, executives extract large compensation when firms borrow predominantly from a few debt types. Specifically, debt specialisation reduces external debt monitoring of executives, increasing the tendency to extract large compensation. We then examine and find that firms with high financial constraints and facing high product market competition extract larger compensation when debt is concentrated among a few debt sources due to the increased incentives to improve firm performance. Our results are robust to alternative proxies for debt specialisation and executive compensation and alternative models that deal with endogeneity concerns associated with the measure of debt specialisation.
| Original language | English |
|---|---|
| Pages | 1-42 |
| Number of pages | 42 |
| Publication status | Published - 8 Sept 2022 |
Keywords
- debt specialisation
- executive compensation
- product market competition
- financial constraints