The Effect of Executive Compensation on Credit Default Swap Spread

IF 1.1 Q4 BUSINESS

Gadjah Mada international journal of business Pub Date : 2019-04-22 DOI:10.22146/GAMAIJB.32246

Meizaroh Meizaroh, M. Masripah

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引用次数: 1

Abstract

Investors have been trying to formulate the optimum composition of executives’ compensation which will incentivize the executives to perform better and act in the shareholders’ best interests. This study aims to find empirical evidence about the impact of executive compensation on the default risk with the Credit Default Swap (CDS) spread as the proxy, using panel data to test the research model, which combines the analysis of cross-section and time series data. The study is conducted based on 1,416 observations of 177 U.S. companies from 2008-2015. The data are mainly collected from Datastream, Compustat, CRSP, and the US SEC’s EDGAR database. The current study provides a contribution by suggesting that executives’ compensation will trigger risk-taking behavior. The results of this study reveal, firstly, both equity-based compensation and debt-like compensation induce risk-taking behavior by the executives. Secondly, the correlation between both the form of the compensation and the CDS spread is weakened in a high information asymmetry environment. Lastly, this study finds that a CFO’s compensation has more influence on the CDS spread, compared to the other board executives, but this condition only occurs when the compensation is awarded in the form of debt-like compensation. To improve the generalization of the results, a further study may consider expanding the sample into several countries.

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高管薪酬对信用违约掉期利差的影响

投资者一直在努力制定高管薪酬的最佳组成，这将激励高管表现更好，并为股东的最大利益行事。本研究旨在以信用违约互换（CDS）价差为代理，利用面板数据对研究模型进行检验，寻找高管薪酬对违约风险影响的实证证据。这项研究是根据2008-2015年对177家美国公司的1416项观察结果进行的。数据主要来自Datastream、Compustat、CRSP和美国证券交易委员会的EDGAR数据库。目前的研究表明，高管的薪酬会引发冒险行为。研究结果表明，首先，股权薪酬和债务薪酬都会诱导高管的冒险行为。其次，在高度信息不对称的环境中，补偿形式和CDS价差之间的相关性减弱。最后，本研究发现，与其他董事会高管相比，首席财务官的薪酬对CDS价差的影响更大，但只有当薪酬以债务式薪酬的形式授予时，才会出现这种情况。为了提高结果的通用性，进一步的研究可能会考虑将样本扩展到几个国家。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Gadjah Mada international journal of business BUSINESS-

CiteScore

2.00

自引率

14.30%

发文量

审稿时长

40 weeks

期刊介绍： An objective of the Gadjah Mada International Journal of Business (GamaIJB) is to promote the wide dissemination of the results of systematic scholarly inquiries into the broad field of business research. The GamaIJB is intended to be the journal for publishing articles reporting the results of research on business. The GamaIJB invites manuscripts in the areas: Marketing Management, Finance Management, Strategic Management, Operation Management, Human Resource Management, E-business, Knowledge Management, Management Accounting, Management Control System, Management Information System, International Business, Business Economics, Business Ethics and Sustainable, and Entrepreneurship.