Is executive compensation a substitute governance mechanism to debt financing and leasing?
Minhat, M and Dzolkarnaini, N 2015, 'Is executive compensation a substitute governance mechanism to debt financing and leasing?' , Applied Economics, 48 (14) , pp. 1293-1302.
- Accepted Version
Restricted to Repository staff only until 22 March 2017.
Download (313kB) | Request a copy
This study examines whether and how CEO equity incentives relate to financing choices (i.e., debt and leases). Using manually collected CEO compensation and lease data for a sample of large UK firms, we found evidence of a negative relationship between CEO equity incentives and firm leverage. We also found that CEO equity incentives and leases are negatively related. The results are consistent with the theory introduced in this study on the substitutability of executive compensation and firm’s debt/lease financing. Our findings represent fresh empirical evidence and renewed interpretation regarding the relationship between executive equity-based incentives and firm’s financing choices. The substitutability theory we introduced here suggests that firms with greater use of debt and/or leases will implement less equity-based compensation in mitigating the agency cost of equity.
|Uncontrolled Keywords:||Executive compensation, CEO pay, CEO incentives, Capital structure, Debt, Leasing, Corporate governance|
|Themes:||Media, Digital Technology and the Creative Economy|
|Schools:||Schools > Salford Business School > Business and Management Research Centre|
|Journal or Publication Title:||Applied Economics|
|Publisher:||Taylor & Francis|
|Funders:||Non funded research|
|Depositing User:||Dr Nazam Dzolkarnaini|
|Date Deposited:||19 Oct 2015 13:06|
|Last Modified:||02 Feb 2016 09:21|
Actions (login required)
|Edit record (repository staff only)|