 Duration of executive compensation and maturity structure of corporate debtXudong Fu, Minjie Huang and Tian Tang Journal of Corporate Finance, 2022, vol. 73, issue C Abstract: While recent studies show that long vesting periods in managerial compensation increase corporate investments, these investments such as research and development contribute to information asymmetry and therefore may affect the maturity structure of corporate debt. We find that firms with longer CEO pay duration have shorter debt maturity, which is consistent with the notion that firms shorten debt maturity to mitigate information asymmetry. This effect is stronger for firms with larger bid-ask spread, less analyst coverage, more growth options, more volatile returns, and lower default risk and for firms in R&D intensive industries. Firms with longer CEO pay duration prefer debt issuance over equity issuance, and they also exhibit higher future investment growth and Tobin's Q. We strengthen the identification by exploiting the quasi-randomly staggered compliance of a regulatory change (FAS 123-R) and the enforceability of noncompetition agreements as exogenous shocks to CEO pay duration. Our paper shows that the duration of executive compensation affects corporate financing decisions. Keywords: Information asymmetry; Debt maturity structure; CEO pay duration; Investment (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:73:y:2022:i:c:s0929119922000311 DOI: 10.1016/j.jcorpfin.2022.102188 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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