Agency Cost of Debt and Inside Debt: The Role of CEO Overconfidence

Emilios Galariotis · Christodoulos Louca · Dimitris Petmezas · Shuhui Wang

31 citations0/0 files storedBritish Journal of Management

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Auditing, Earnings Management, Governance Corporate Insolvency and Governance

Abstract

Abstract This study extends our understanding of CEO inside debt compensation under an agency problem perspective by considering the impact of a behavioural trait, namely CEO overconfidence. Using a sample of US firms in Standard & Poor's ExecuComp for the period 2006–2019, we find that overconfident CEOs exhibit greater inside debt incentives (i.e. incentives arising from defined‐benefit pensions and deferred compensation). This relationship is more pronounced among firms with higher CEO overconfidence‐induced agency cost of debt (e.g. financially unconstrained firms) managed by CEOs who are less able to align compensation with their own preferences (e.g. less powerful CEOs). The results are robust to endogeneity, self‐selection concerns and alternative explanations. We contribute to the inside compensation literature that deals with agency problems under overconfident CEOs, and optimal contracting and managerial power theories.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 31 citations exist upstream.

References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1973The Pricing of Options and Corporate Liabilities 1989Agency Theory: An Assessment and Review 2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 1980Agency Problems and the Theory of the Firm 1979Moral Hazard and Observability 2010New Evidence on Measuring Financial Constraints: Moving Beyond the KZ Index 1988Financing Constraints and Corporate Investment

Cited by

2024Exploring the Third Type of Agency Problem: An Empirical Study of the Impact of Debt Suspension Programmes on SMEs’ Resource Allocations 2023The role of board age diversity in the performance of publicly listed Fintech entities 2023CEO overconfidence and financial reporting complexity: evidence from textual analysis

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.