Tournament Incentives and Firm Credit Risk: Evidence from Credit Default Swap Referenced Firms
31 Pages Posted: 27 May 2020
Date Written: July/August 2019
Abstract
In this paper, we evaluate the impact of managerial tournament incentives on firm credit risk in credit default swap (CDS) referenced firms. We find that intra‐firm tournament incentives are negatively related to credit risk. Our results suggest that tournament incentives reduce credit risk by alleviating the potential for underinvestment when managers are concerned about exacting empty creditors. Further, we find that tournament incentives decrease credit risk when internal governance is strong or product market competition is intense. Taken together, our results suggest that creditors perceive senior manager tournament incentives (SMTI) as a critical determinant of a firm's credit risk, particularly in settings where managerial risk aversion is high.
Keywords: credit default swaps, credit risk, internal governance quality, product market competition, tournament incentives
JEL Classification: G32, G34, J31
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Tournament Incentives and Firm Credit Risk: Evidence from Credit Default Swap Referenced Firms
This is a Wiley-Blackwell Publishing paper. Wiley-Blackwell Publishing charges $42.00 .
File name: JBFA.pdf
Size: 0K
If you wish to purchase the right to make copies of this paper for distribution to others, please select the quantity.
