Agency cost of CEO perquisites in bank loan contracts

Chia-Ying Chan (), Iftekhar Hasan and Chih-Yung Lin
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Chia-Ying Chan: National Taipei University

Review of Quantitative Finance and Accounting, 2021, vol. 56, issue 4, No 1, 1258 pages

Abstract: Abstract This study investigates the association between CEO perquisites and bank loan spreads. We collect detailed data on CEO perquisites from the proxy statements of S&P 500 firms between 1993 and 2015 to study this issue. The empirical evidence supports the agency cost view that the lending banks demand significantly higher returns (spread), more collateral, and stricter covenants from firms with higher CEO perquisites. We further confirm that the effect of these perquisites remains after we control for various corporate governance and agency cost factors. We conclude that banks consider CEO perquisites as a type of agency cost when they make lending decisions.

Keywords: CEO perquisites; Agency cost; Loan spread; Corporate governance; Compensation schemes (search for similar items in EconPapers)
JEL-codes: G21 G32 G34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11156-020-00926-5

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