Abstract
This paper discusses how contingent convertible bonds (CCB) influence the risk-taking behaviour of managers. A methodology to measure the impact is presented. The results show that the decision of issuing CCB to finance company assets sets incentives to managers to increase risk, if it is not adjusted to the compensation system. However, if the remuneration of managers is adjusted simultaneously with the issuance, e.g. with internal debt, the drawbacks of the sole compensation with stock options can be equalised. Furthermore, it was found that CCB does have an impact on the risk-taking behaviour, while CCB does not change the incentive to increase the company value at all.
Original language | English |
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Pages (from-to) | 54-64 |
Journal | Cuadernos de Economía |
Volume | 38 |
Issue number | 106 |
DOIs | |
Publication status | Published - 2015 |
Externally published | Yes |
Keywords
- Contingent Convertible Bonds
- Executive Compensation
- Incentives
- Inside Debt
- Risk-Taking