Thesis / Dissertation

Three Essays on CEO Compensation and the Agency Problem of Debt

Lan Phuong Nguyen, Garry Twite (ed.)

Published : 2020

Abstract

Jensen and Meckling [1976] propose that compensating a manager with debt-like payment, a.k.a. “inside debt”, can be a mechanism to mitigate the agency problem of debt. Recent empirical papers document that higher inside debt held by a chief executive officer (“CEO”), which is measured by the present value of their supplemental retirement benefits, is associated with more conservative management and lower cost of debt. However, the grant of inside debt might originate from rent extraction purposes, and happens to encourage risk aversion among CEOs. Therefore, it remains unclear whether companies use CEO inside debt as a mechanism to mitigate the agency problem of debt. To address this questio..

View full abstract

University of Melbourne Researchers