Cambrea, Domenico Rocco; Colonnello, Stefano; Curatola, … - 2016 - This draft: December 13, 2016
We develop a model that endogenizes the manager's choice of firm risk and of inside debt investment strategy. Our model … delivers two predictions. First, managers have an incentive to reduce the correlation between inside debt and company stock in … firms, we provide evidence consistent with the model's predictions. Our results suggest that the weaker link between inside …