Executive Loans

35 Pages Posted: 18 Jul 2003

See all articles by Kuldeep Shastri

Kuldeep Shastri

University of Pittsburgh - Finance Group

Kathleen M. Kahle

University of Arizona - Department of Finance; European Corporate Governance Institute (ECGI)

Date Written: February 2003


This paper analyzes the characteristics and impact of loans made to executives for purposes of stock purchase, option exercise and relocation. We find that loans made to assist executives in purchasing stock or excercising options are larger and have higher interest rates than relocation loans. All types of loans, however, are issued at below-market interest rates, on average. We also find while stock purchase loans are given to managers with low existing ownership, option exercise loans are given to managers with high existing ownership and high cash compensation. Finally, our results indicate that executive stock ownership increases follwong stock purchase and option exercise loans. For managers as a whole, a loan that enables a manager to buy 100 shares of stock results in only an eight-share increase in ownership. However, the relation between ownership changes and stock purcahse loans is much stronger for low ownership managers.

Suggested Citation

Shastri, Kuldeep and Kahle, Kathleen M., Executive Loans (February 2003). Available at SSRN: https://ssrn.com/abstract=423447 or http://dx.doi.org/10.2139/ssrn.423447

Kuldeep Shastri (Contact Author)

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~ks112354

Kathleen M. Kahle

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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