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A model of managerial compensation, firm leverage and credit stimulus

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dc.contributor.authorGete, Pedro
dc.contributor.authorChakraborti, Rajdeep
dc.contributor.authorDahiya, Sandeep
dc.contributor.authorGe, Lei
dc.contributor.funderMinisterio de Ciencia, Innovación y Universidades
dc.contributor.funderAgencia Estatal de Investigación
dc.contributor.rorhttps://ror.org/02jjdwm75
dc.date.accessioned2024-10-23T11:39:15Z
dc.date.available2024-10-23T11:39:15Z
dc.date.issued2024-06
dc.description.abstractWe study a model in which leverage and compensation are both choice variables for the firm and borrowing spreads are endogenous. First, we analyze the correlation between leverage and variable compensation. We show that allowing for endogenous compensation and leverage can explain the conflicting findings of the empirical literature. We uncover a new channel of complementarity between effort and leverage that induces a correlation sign opposite to what current theoretical models predict. Second, we study the dynamics of leverage and compensation design after a credit stimulus. We derive a set of new empirical predictions. For outward-shifts in credit supply, variable compensation is increasing in leverage growth. Moreover, variable compensation increases after the credit stimulus, especially for firms with low idiosyncratic risk.
dc.description.peerreviewedyes
dc.description.statusPublished
dc.formatapplication/pdf
dc.identifier.citationChakraborti, R., Dahiya, S., Ge, L., & Gete, P. (2024). A model of managerial compensation, firm leverage and credit stimulus. Journal of Financial Stability, 72, 101248. https://doi.org/10.1016/j.jfs.2024.101248
dc.identifier.doihttps://doi.org/10.1016/j.jfs.2024.101248
dc.identifier.issn1878-0962
dc.identifier.urihttps://hdl.handle.net/20.500.14417/3295
dc.issue.number72
dc.journal.titleJournal of Financial Stability
dc.language.isoen
dc.page.total66
dc.publisherElsevier
dc.relation.departmentFinance
dc.relation.entityIE University
dc.relation.projectIDPID2021-125359NB-I0
dc.relation.projectIDMCIN/AEI/10.13039/501100011033/FEDER
dc.relation.schoolIE Business School
dc.rightsAttribution-NonCommercial-NoDerivatives 4.0 International
dc.rights.accessRightsinfo:eu-repo/semantics/openAccess
dc.rights.urihttp://creativecommons.org/licenses/by-nc-nd/4.0/
dc.subject.keywordCompensation
dc.subject.keywordCredit policies
dc.subject.keywordExecutive ownership
dc.subject.keywordLeverage
dc.titleA model of managerial compensation, firm leverage and credit stimulus
dc.typeinfo:eu-repo/semantics/article
dc.version.typeinfo:eu-repo/semantics/acceptedVersion
dspace.entity.typePublication
relation.isAuthorOfPublication627e06b8-d61f-4611-96fe-15cf32670e9f
relation.isAuthorOfPublication.latestForDiscovery627e06b8-d61f-4611-96fe-15cf32670e9f
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