Management Equity Incentives and Bond Investor Protection:Based on the Design of Bond Covenants
This paper examines the impact of management equity incentives on the use of restrictive bond cov-enants from the perspective of bond investor protection.Utilizing manually organized data on bond covenant terms from listed companies between 2010 and 2021,our study reveals that the implementation of management equity incentives leads to an increased use of restrictive bond covenant clauses.Specifically,a higher intensity of equity incentives corre-lates with greater usage of covenants,particularly those restricting asset transfers and investments.The positive effect of management equity incentives on the use of bond covenants is amplified by higher levels of major shareholder control and mitigated by good information transparency.Additionally,companies with higher management remuneration levels and a higher shareholder-management collusion index exhibit increased usage of restrictive bond covenants.The imple-mentation of management equity incentives prompts greater use of bond covenants by raising the company's risk-taking levels and the extent of shareholder expropriation.These findings indicate that bond investors can discern the risk changes induced by management equity incentives and seek to protect their interests through more comprehensive bond covenants.
NETL
NSTL
万方数据
