中国人民大学 | RENMIN UNIVERSITY of CHINA
本期主题：The role of creditors and CEO Compensation Design: Evidence from Credit Default Swaps.
What is the role of creditors in shaping the design of managerial compensation? This paper provides empirical evidence by investigating how the trading of credit default swaps (CDS) shapes the design of CDS-referenced firm’s managerial compensation, especially its risk-taking incentives. We find that CEO compensation vega increases significantly when a firm has CDS referring its debt, and the causal relationship is verified by a set of endogeneity tests. The CDS effect is stronger for firms with larger risk-shifting agency conflict, consistent with the view that the alleviation of creditors’ risk concerns is the main mechanism driving this effect. Additionally, we document that the increase in CEO compensation vega caused by CDS trading results into more risk taking, which, however, does not lead to an improvement in firm performance and shareholder value.
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Jieying Hong is an Assistant Professor of Finance at ESSEC Business School. She received a M.A. in Finance from Peking University in 2008, a M.A. in Economics from Toulouse School of Economics in 2009 and a Ph.D. in Finance from Toulouse School of Economics in 2013. Her research interests are in the areas of Corporate Finance, Behavioral Finance, Asset Bubbles, Contract Theory, and Organizational Economics.