CEO contractual protection and debt contracting

CEO employment agreements and severance pay agreements are prevalent among S&P1500 firms. While prior research has examined their impact on corporate decision from shareholders’ perspective, there is little research on their impact from debtholders’ perspective. We examine the effect on debt con...

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Main Authors: CHENG, Qiang, CHEN, Xia, LO, Alvis K., WANG, Xin
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2017
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Online Access:https://ink.library.smu.edu.sg/soa_research/1625
https://ink.library.smu.edu.sg/context/soa_research/article/2652/viewcontent/ceo_contractual_protection_debt_contracting_2016_dec.pdf
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spelling sg-smu-ink.soa_research-26522017-09-26T03:08:45Z CEO contractual protection and debt contracting CHENG, Qiang CHEN, Xia LO, Alvis K. WANG, Xin CEO employment agreements and severance pay agreements are prevalent among S&P1500 firms. While prior research has examined their impact on corporate decision from shareholders’ perspective, there is little research on their impact from debtholders’ perspective. We examine the effect on debt contracting of CEO contractual protection, in the form of employment agreements and severance pay agreements. We find that compared with other loans, loans issued by firms with CEO contractual protection contain more financial covenants, particularly performance covenants, are more likely to have performance pricing provisions, and have higher loan spreads. We further find that this effect increases with the monetary strength of CEO contractual protection and CEOs’ appetite and opportunities for risk-taking. Collectively these results shed light on the impact of CEO contractual protection on debt contracting. 2017-06-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/soa_research/1625 https://ink.library.smu.edu.sg/context/soa_research/article/2652/viewcontent/ceo_contractual_protection_debt_contracting_2016_dec.pdf http://creativecommons.org/licenses/by-nc-nd/4.0/ Research Collection School Of Accountancy eng Institutional Knowledge at Singapore Management University employment agreement severance pay agreement debt contracting Accounting Corporate Finance
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic employment agreement
severance pay agreement
debt contracting
Accounting
Corporate Finance
spellingShingle employment agreement
severance pay agreement
debt contracting
Accounting
Corporate Finance
CHENG, Qiang
CHEN, Xia
LO, Alvis K.
WANG, Xin
CEO contractual protection and debt contracting
description CEO employment agreements and severance pay agreements are prevalent among S&P1500 firms. While prior research has examined their impact on corporate decision from shareholders’ perspective, there is little research on their impact from debtholders’ perspective. We examine the effect on debt contracting of CEO contractual protection, in the form of employment agreements and severance pay agreements. We find that compared with other loans, loans issued by firms with CEO contractual protection contain more financial covenants, particularly performance covenants, are more likely to have performance pricing provisions, and have higher loan spreads. We further find that this effect increases with the monetary strength of CEO contractual protection and CEOs’ appetite and opportunities for risk-taking. Collectively these results shed light on the impact of CEO contractual protection on debt contracting.
format text
author CHENG, Qiang
CHEN, Xia
LO, Alvis K.
WANG, Xin
author_facet CHENG, Qiang
CHEN, Xia
LO, Alvis K.
WANG, Xin
author_sort CHENG, Qiang
title CEO contractual protection and debt contracting
title_short CEO contractual protection and debt contracting
title_full CEO contractual protection and debt contracting
title_fullStr CEO contractual protection and debt contracting
title_full_unstemmed CEO contractual protection and debt contracting
title_sort ceo contractual protection and debt contracting
publisher Institutional Knowledge at Singapore Management University
publishDate 2017
url https://ink.library.smu.edu.sg/soa_research/1625
https://ink.library.smu.edu.sg/context/soa_research/article/2652/viewcontent/ceo_contractual_protection_debt_contracting_2016_dec.pdf
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