CEO tournament incentives and corporate debt contracting

Chinmoy Ghosh, Di Huang, Nam H. Nguyen and Hieu V. Phan

Journal of Corporate Finance, 2023, vol. 78, issue C

Abstract: This study examines the relation between CEO tournament incentives, proxied by the difference between CEO pay and the median pay of the senior executives of a given firm, and corporate debt contracting. We find negative relations between CEO pay gap and the cost of debt and default risk, and a positive relation between CEO pay gap and debt maturity. Further analysis indicates that the results are stronger for firms with near-retirement CEOs, which are more likely to run CEO tournaments. Our evidence suggests that creditors view tournament incentives favorably and are willing to provide better debt terms.

Keywords: Executive compensation; Tournament incentives; CEO pay gap; Debt maturity; Cost of debt; Default risk (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:78:y:2023:i:c:s0929119922001638

DOI: 10.1016/j.jcorpfin.2022.102320

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