Inside Debt and Mergers and Acquisitions

73 Pages Posted: 16 Mar 2013 Last revised: 17 Aug 2018

See all articles by Hieu V. Phan

Hieu V. Phan

University of Massachusetts Lowell

Date Written: April 7, 2013

Abstract

I empirically investigate the relation between CEO inside debt holdings and mergers and acquisitions (M&As) and find evidence consistent with the agency theory’s prediction of a negative relation between CEO inside debt holdings and corporate risk taking. Further analysis shows that CEO inside debt holdings are positively correlated with M&A announcement abnormal bond returns and long-term operating performance, but negatively correlated with M&A announcement abnormal stock returns. Finally, I find evidence that acquirers restructure the post-merger composition of CEO compensation that mirrors their capital structure in order to alleviate incentives for wealth transfer from shareholders to bondholders or vice versa.

Keywords: inside debt, CEO inside leverage, CEO incentive, executive compensation, Merger and Acquisition, pension

Suggested Citation

Phan, Hieu V., Inside Debt and Mergers and Acquisitions (April 7, 2013). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2233943

Hieu V. Phan (Contact Author)

University of Massachusetts Lowell ( email )

72 University Avenue
Lowell, MA 01854
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
901
Abstract Views
15,910
Rank
48,576
PlumX Metrics