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The Determinants of CEO Inside Debt and its Components

60 Pages Posted: 28 Nov 2010 Last revised: 18 Jan 2011

Wei Cen

Peking University - HSBC Business School

Date Written: November 10, 2010

Abstract

I use the new SEC disclosure rule of 2006 to examine the role of CEO inside debt (pension plans and deferred compensation plans) in CEO compensation problem. I find that the contribution ratio of deferred compensation to total cash compensation is positively related to firm size, firm liquidity status, firm default risk, and executive personal wealth. In addition, I find a non-linear relation between firm leverage and CEO inside debt. The investigation shows that the underlying reasons for this non-linear relation may relate to firm financial distress and CEO risk aversion. This finding suggests that inside debt plays a more complex role in mitigating the asset substitution problem.

Keywords: Inside Debt, Managerial Compensation, Capital Structure, Corporate Governance

JEL Classification: D23, G32, G38, J33, J44, M14, M52

Suggested Citation

Cen, Wei, The Determinants of CEO Inside Debt and its Components (November 10, 2010). Available at SSRN: https://ssrn.com/abstract=1716306 or http://dx.doi.org/10.2139/ssrn.1716306

Wei Cen (Contact Author)

Peking University - HSBC Business School ( email )

HSBC Business School, Peking University
University Town, Nanshan District
Shenzhen, Guangdong
China

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