This paper studies how managerial compensation is shaped by the risk preference of shareholders. Firms with a large ownership held by "dual holders'' -- institutional investors that simultaneously hold equity and bonds of the company -- choose a less risk-inducing compensation structure....

This paper provides a new explanation for CEO turnover. In an environment in which all potential CEOs are endowed with the same ability and the firm is not looking for a strategy change, I demonstrate that CEO turnover may still occur in equilibrium. Specifically, a performance-contingent CEO...