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Direct and Indirect Risk-Taking Incentives of Inside Debt
We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about the relation between credit spreads and different compensation components. First, we show that credit ...
Abandon Ship: Deferred Compensation and Risk-Taking Incentives in Bad Times
We study how US chief executive officers (CEOs) invest their deferred compensation plans depending on the firm's profitability. By looking at the correlation between the CEO's return on these plans and the firm's stock ...
Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
We develop a model that reproduces the average return and volatility spread between sin and non-sin stocks. Our investors do not necessarily boycott sin companies. Rather, they are open to invest in any company while trading ...