Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/158506
Authors: 
Cambrea, Domenico Rocco
Colonnello, Stefano
Curatola, Giuliano
Fantini, Giulia
Year of Publication: 
2017
Series/Report no.: 
SAFE Working Paper Series 160
Abstract: 
We develop a model that endogenizes the manager's choice of firm risk and of deferred compensation investment strategy. Our model delivers two predictions. First, managers have an incentive to reduce the correlation between deferred compensation and company stock in bad times. Second, managers that reduce such a correlation take on more risk in bad times. Using a sample of U.S. public firms, we provide evidence consistent with the model's predictions. Our results suggest that the weaker link between deferred compensation and company stock in bad times does not translate into a mitigation of debt-equity conflicts.
Subjects: 
executive compensation
deferred compensation
corporate distress
JEL: 
G32
G34
Document Type: 
Working Paper

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