What is the role of creditors in shaping the design of risk-taking incentives in managerial compensation? This paper provides empirical evidence by investigating how the trading of credit default swaps (CDS) shapes the design of CDS-referenced firm's managerial compen- sation, especially its...

The recent seminal work of Gabaix (2011) raises a puzzling question: If centralization-putting different projects under the same roof-reduces diversification for investors, how does this situation reconcile with the seemingly contradictory fact that it also boosts a firm's borrowing capacity? To...

This paper studies the effect of risk-taking incentives provided in managerial compensation on corporate debt maturity choices. The Financial Accounting Standard (FAS) 123R is used as a quasi-natural experiment to establish causality. FAS 123R requires firms to expense stock options at fair...