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The effect of CEO option compensation on the capital structure : a natural experiment
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Tosun, Onur (2016) The effect of CEO option compensation on the capital structure : a natural experiment. Financial Management , 45 (4). pp. 953-979. doi:10.1111/fima.12116 ISSN 0046-3892.
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Official URL: http://dx.doi.org/10.1111/fima.12116
Abstract
Firms simultaneously choose both their capital and their executive compensation structure. Using the Internal Revenue Code 162(m) tax law as an exogenous shock to compensation structure in a natural experiment setting, I identify firm leverage changes as a result of chief executive officer (CEO) option compensation changes. The evidence provides strong support for debt agency theory. Firms appear to decrease leverage when CEOs are paid with more options and when CEO options become a higher percentage of future cash flows. The findings are robust to controlling for corporate governance and convertible debt.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HG Finance | ||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School > Finance Group Faculty of Social Sciences > Warwick Business School |
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Library of Congress Subject Headings (LCSH): | Chief executive officers -- Salaries, etc , Directors of corporations, Corporate governance -- Law and legislation, Cash flow | ||||||||
Journal or Publication Title: | Financial Management | ||||||||
Publisher: | Wiley-Blackwell Publishing, Inc. | ||||||||
ISSN: | 0046-3892 | ||||||||
Official Date: | 2016 | ||||||||
Dates: |
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Volume: | 45 | ||||||||
Number: | 4 | ||||||||
Page Range: | pp. 953-979 | ||||||||
DOI: | 10.1111/fima.12116 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||
Date of first compliant deposit: | 1 March 2016 | ||||||||
Date of first compliant Open Access: | 7 September 2016 |
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