TY  - SER
AU  - Balsam,Steven
AU  - Gu,Yuqi
AU  - Mao,Connie X.
TI  - Creditor influence and CEO compensation: evidence from debt covenant violations
KW  - Contabilidad
KW  - Publicaciones seriadas
KW  - Instituciones financieras
KW  - Gobierno corporativo
KW  - Convenios de pagos
N2  - Debt covenant violation alters firm dynamics, providing creditors with the right to demand repayment, and via that right, influence firm actions. We provide evidence consistent with creditors employing that channel to influence CEO compensation. Using regression discontinuity analysis, we show that in the year after a covenant violation, after controlling for other factors, CEO compensation is 8.5 percent lower and the CEO's compensation package contains fewer risk-taking incentives, as the vega associated with newly granted options is 26 percent lower. These changes are more pronounced when the creditor has greater influence, such as when the borrower and creditor have a prior lending relationship, the creditor is a highly reputable bank, or when the borrower is financially weaker. We also find that CEOs' risk-taking incentives decrease with the number of debt covenants; in particular, the number of performance debt covenants being breached
ER  -