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CEO Inside Debt and Costs of Bank Debt Financing

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Authors
HAN, JOONG HO
Issue Date
2011-12
Publisher
College of Business Administration (경영대학)
Citation
Seoul Journal of Business, Vol.17 No.2, pp. 123-150
Keywords
inside debtmanagerial agencycosts of debtdebt contractsloan terms
Abstract
This study examines the role of CEOs pensions and deferred

compensations by exploring their impacts on pricing and non-pricing

contract terms of bank loans. CEOs inside debt, defined as the sum of

defined benefit pensions and deferred compensations, pays fixed amounts

at periodic intervals. We find that higher inside debt holdings significantly

reduce both loan rate spreads and demands for collateral. We also find that

such effects are particularly pronounced under weak external governance

proxied by strong anti-takeover defenses. Overall, our results support the

idea that debt-like incentives for CEOs increase align the interests between

managers and creditors.
ISSN
1226-9816
Language
English
URI
https://hdl.handle.net/10371/75593
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College of Business Administration/Business School (경영대학/대학원)Dept. of Business Administration (경영학과)Seoul Journal of BusinessSeoul Journal of Business Volume 17, Number 1/2 (2011)
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