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. These predictions find support in the empirical literature.
|Citazione:||Cerasi, V., & Daltung, S. (2006). Financial Structure, Managerial Compensation and Monitoring. Financial Markets Group, London School of Economics.|
|Carattere della pubblicazione:||Scientifica|
|Titolo:||Financial Structure, Managerial Compensation and Monitoring|
|Autori:||Cerasi, V; Daltung, S.|
|Data di pubblicazione:||2006|
|Appare nelle tipologie:||04 - Monografia|