Determinants of the Floating-to-Fixed Rate Debt Structure of Firms

47 Pages Posted: 28 Feb 2005

See all articles by Sudheer Chava

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business

Amiyatosh Purnanandam

University of Michigan, Stephen M. Ross School of Business

Date Written: February 28, 2006

Abstract

We analyze the effects of managerial incentive, monitoring, firm characteristics and market-timing on floating-to-fixed rate debt structure of firms. We find that the CFO's (not CEO's) incentive has a strong influence on a firm's debt structure. When CFOs have incentives to increase (decrease) firm-risk, firms obtain volatility-increasing (decreasing) debt structure. Internal monitoring by the CEO and independent board members as well as external monitoring through corporate control market weakens the link between CFO's incentive and debt structure. Our findings suggest that agency problems at the level of non-CEO executives may be an important driver of various corporate decisions.

Keywords: Hedging, floating rate debt, corporate governance, executive compensation

JEL Classification: G3

Suggested Citation

Chava, Sudheer and Purnanandam, Amiyatosh, Determinants of the Floating-to-Fixed Rate Debt Structure of Firms (February 28, 2006). EFA 2006 Zurich Meetings. Available at SSRN: https://ssrn.com/abstract=609621 or http://dx.doi.org/10.2139/ssrn.609621

Sudheer Chava

Georgia Institute of Technology - Scheller College of Business ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

HOME PAGE: http://www.prism.gatech.edu/~schava6/

Amiyatosh Purnanandam (Contact Author)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
752
Abstract Views
4,506
rank
35,204
PlumX Metrics