Executive compensation and the cost of debt

Rezaul Kabir, Hao Li, Joulia Wiktorowna Veld-Merkoulova

Research output: Contribution to journalArticleResearchpeer-review

45 Citations (Scopus)


This study examines how different components of executive compensation affect the cost of debt. We find that debt-like and equity-like pay components have differing effects: an increase in defined benefit pensions is associated with lower bond yield spread, while higher share holdings lead to higher spreads. In addition, we find that stock options have a mixed impact on the cost of debt whereas cash bonus has no significant impact. Overall, our results indicate that corporate bondholders are fully aware of both risk-taking and risk-avoiding incentives created by various executive pay components.
Original languageEnglish
Pages (from-to)2893 - 2907
Number of pages15
JournalJournal of Banking and Finance
Issue number8
Publication statusPublished - 2013
Externally publishedYes

Cite this