Creditor Influence and CEO Compensation: Evidence from Debt Covenant Violations
研究发现债务契约违反后，债权人通过要求还款的权利影响CEO薪酬，使CEO薪酬降低8.5%，风险激励减少26%，且当债权人影响力更大时效果更显著。
ABSTRACT Debt covenant violation alters firm dynamics, providing creditors with the right to demand repayment, and via that right, influence firm actions. We provide evidence consistent with creditors employing that channel to influence CEO compensation. Using regression discontinuity analysis, we show that in the year after a covenant violation, after controlling for other factors, CEO compensation is 8.5 percent lower and the CEO's compensation package contains fewer risk-taking incentives, as the vega associated with newly granted options is 26 percent lower. These changes are more pronounced when the creditor has greater influence, such as when the borrower and creditor have a prior lending relationship, the creditor is a highly reputable bank, or when the borrower is financially weaker. We also find that CEOs' risk-taking incentives decrease with the number of debt covenants; in particular, the number of performance debt covenants being breached. JEL Classifications: G21; G34.