Executive stock ownership guidelines and debtholder wealth
We examine how the adoption of executive stock ownership guidelines affects debtholder wealth. We find that guideline adoption is associated with lower loan spreads, fewer collateral requirements, and fewer other restrictive covenants. The results are robust to using an instrumental variables approa...
| Main Authors: | , |
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| Other Authors: | |
| Format: | Journal Article |
| Language: | English |
| Published: |
2019
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| Online Access: | https://hdl.handle.net/10356/102484 http://hdl.handle.net/10220/49491 |
| _version_ | 1826128399603597312 |
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| author | Kang, Jun-Koo Xu, Limin |
| author2 | Nanyang Business School |
| author_facet | Nanyang Business School Kang, Jun-Koo Xu, Limin |
| author_sort | Kang, Jun-Koo |
| collection | NTU |
| description | We examine how the adoption of executive stock ownership guidelines affects debtholder wealth. We find that guideline adoption is associated with lower loan spreads, fewer collateral requirements, and fewer other restrictive covenants. The results are robust to using an instrumental variables approach. We further find that guideline adoption has a negative effect on bond yield spreads and that after the adoption, firms' risk-taking incentives are lower. These results suggest that guideline adoption benefits debtholders by lowering agency costs of debt. However, we also find that adoption of ownership guidelines is associated with a significant increase in stock prices, and that firms are more likely to increase financial reporting quality in the post-adoption period, indicating that guideline adoption incentivizes managers to improve firm fundamentals, benefiting both shareholders and debtholders. |
| first_indexed | 2024-10-01T07:24:21Z |
| format | Journal Article |
| id | ntu-10356/102484 |
| institution | Nanyang Technological University |
| language | English |
| last_indexed | 2024-10-01T07:24:21Z |
| publishDate | 2019 |
| record_format | dspace |
| spelling | ntu-10356/1024842023-05-19T06:44:43Z Executive stock ownership guidelines and debtholder wealth Kang, Jun-Koo Xu, Limin Nanyang Business School Stock Ownership Guideline Debtholder Wealth Business::Finance We examine how the adoption of executive stock ownership guidelines affects debtholder wealth. We find that guideline adoption is associated with lower loan spreads, fewer collateral requirements, and fewer other restrictive covenants. The results are robust to using an instrumental variables approach. We further find that guideline adoption has a negative effect on bond yield spreads and that after the adoption, firms' risk-taking incentives are lower. These results suggest that guideline adoption benefits debtholders by lowering agency costs of debt. However, we also find that adoption of ownership guidelines is associated with a significant increase in stock prices, and that firms are more likely to increase financial reporting quality in the post-adoption period, indicating that guideline adoption incentivizes managers to improve firm fundamentals, benefiting both shareholders and debtholders. 2019-07-30T09:12:46Z 2019-12-06T20:55:37Z 2019-07-30T09:12:46Z 2019-12-06T20:55:37Z 2018 Journal Article Kang, J.-K., & Xu, L. (2019). Executive stock ownership guidelines and debtholder wealth. The Accounting Review, 94(2), 267-295. doi:10.2308/accr-52219 0001-4826 https://hdl.handle.net/10356/102484 http://hdl.handle.net/10220/49491 10.2308/accr-52219 en The Accounting Review © 2018 American Accounting Association. All rights reserved. |
| spellingShingle | Stock Ownership Guideline Debtholder Wealth Business::Finance Kang, Jun-Koo Xu, Limin Executive stock ownership guidelines and debtholder wealth |
| title | Executive stock ownership guidelines and debtholder wealth |
| title_full | Executive stock ownership guidelines and debtholder wealth |
| title_fullStr | Executive stock ownership guidelines and debtholder wealth |
| title_full_unstemmed | Executive stock ownership guidelines and debtholder wealth |
| title_short | Executive stock ownership guidelines and debtholder wealth |
| title_sort | executive stock ownership guidelines and debtholder wealth |
| topic | Stock Ownership Guideline Debtholder Wealth Business::Finance |
| url | https://hdl.handle.net/10356/102484 http://hdl.handle.net/10220/49491 |
| work_keys_str_mv | AT kangjunkoo executivestockownershipguidelinesanddebtholderwealth AT xulimin executivestockownershipguidelinesanddebtholderwealth |