English, Article, Journal or magazine article edition: Financial structure, managerial compensation and monitoring Sonja Daltung; Vittoria Cerasi

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Bookmark: http://trove.nla.gov.au/version/44790
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Financial structure, managerial compensation and monitoring
Author
  • Sonja Daltung
  • Vittoria Cerasi
Physical Description
  • preprint
Notes
  • managerial compensation; financial structure; monitoring; diversification.
  • RePEc:mis:wpaper:20061102
  • When a firm has external debt and monitoring by shareholders is essential, managerial bonuses are shown to be an optimal solution. A small managerial bonus linked to firm's performance not only reduces moral hazard between managers and shareholders, but also between creditors and monitoring shareholders. A negative relation between corporate bond yields and managerial bonuses can be predicted. Furthermore, the model shows how higher managerial pay-performance sensitivity goes hand in hand with greater company leverage and lower company diversification. These predictions find some support in the empirical literature.
  • RePEc:fmg:fmgdps:dp576
Language
  • English
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