時間: 5/15 (五) 10:30-12:00
講題: Do CEO Inside Debt Holdings Influence the Cost of Equity Capital?
This study examines the relation between CEO inside debt holdings and the cost of equity capital. We conjecture that CEO inside debt holdings could have two opposite effects on the cost of equity. On the one hand, shareholders might perceive CEO inside debt holdings as beneficial because it could constrain aggressive managerial behaviors and, therefore, shareholders could demand lower required rate of returns. On the other hand, a higher level of CEO insider debt may increase shareholders’ concerns on potential debtholder-shareholder agency conflicts and lower pay-for-performance sensitivity, leading to a higher cost of equity. Using a sample of 8,182 firm-year observations during 2006-2013, we find an overall negative relation between CEO inside debt holdings and the cost of equity capital. Such a negative relation is robust to a variety of robustness checks, including tests based on CEO turnover events and the instrumental-variable approach. Consistent with the prediction of Edmans and Liu (2011), we also find that the negative relation between CEO inside debt holdings and the cost of equity capital is more pronounced in firms with greater bankruptcy risk. Overall, these findings suggest that shareholders value the beneficial role of CEO inside debt holdings in constraining aggressive managerial behaviors.