Credit Stimulus, Executive Compensation, and Firm Leverage

Forthcoming in Management Science

45 Pages Posted: 10 Apr 2017 Last revised: 12 Sep 2022

See all articles by Sandeep Dahiya

Sandeep Dahiya

Georgetown University - Department of Finance

Lei Ge

Georgetown University

Rajdeep Chakraborti

Durham University Business School; IE Business School; IE University

Pedro Gete

IE Business School; IE University

Date Written: August 1, 2020

Abstract

We show that executive ownership is a significant driver of the demand for credit following credit expansion policies. Our focus on credit demand is in contrast to most studies that have focused on credit supply factors such as bank-capital. Our identification exploits the large and unexpected Chinese credit expansion in 2008. This setting offers a unique advantage as in 2008 the Chinese government had almost complete control over the banking sector and it directed the banks to increase credit supply. Thus, in this setting, demand, rather than supply, largely drives the observed changes in firms' borrowing. We provide extensive robustness tests to validate our results.

Keywords: China, Credit Policies, Executive Compensation, Leverage

JEL Classification: E44, G28, G30, G32, G34

Suggested Citation

Dahiya, Sandeep and Ge, Lei and chakraborti, rajdeep and Gete, Pedro, Credit Stimulus, Executive Compensation, and Firm Leverage (August 1, 2020). Forthcoming in Management Science, Available at SSRN: https://ssrn.com/abstract=2948189 or http://dx.doi.org/10.2139/ssrn.2948189

Sandeep Dahiya

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3832 (Phone)

Lei Ge

Georgetown University ( email )

Washington, DC
United States

Rajdeep Chakraborti

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

IE Business School; IE University ( email )

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

Pedro Gete (Contact Author)

IE Business School

Calle Maria de Molina 12, Bajo
Madrid, Madrid 28006
Spain

IE University ( email )

Calle Pedro de Valdivia 21
Madrid, Madrid 28006
Spain

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