The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Sat, 18 Apr 2026 11:30:34 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png CEO Inside Debt Holdings and the Riskiness of Firm Investment and Financial Policies – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 CEO Inside Debt Holdings and the Riskiness of Firm Investment and Financial Policies https://corpgov.law.harvard.edu/2011/11/21/ceo-inside-debt-holdings-and-the-riskiness-of-firm-investment-and-financial-policies/?utm_source=rss&utm_medium=rss&utm_campaign=ceo-inside-debt-holdings-and-the-riskiness-of-firm-investment-and-financial-policies https://corpgov.law.harvard.edu/2011/11/21/ceo-inside-debt-holdings-and-the-riskiness-of-firm-investment-and-financial-policies/#comments Mon, 21 Nov 2011 15:00:38 +0000 http://blogs.law.harvard.edu/corpgov/?p=23272?d=20230208111845EST Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday, November 21, 2011
Editor's Note:

The following post comes to us from Cory Cassell, Shawn Huang, Juan Manuel Sanchez, and Michael Stuart, all of the Department of Accounting at the University of Arkansas.

In the paper, Seeking Safety: The Relation Between CEO Inside Debt Holdings and the Riskiness of Firm Investment and Financial Policies, forthcoming in the Journal of Financial Economics, we investigate whether CEOs with large inside debt holdings protect the value of their holdings by implementing less risky investment and financial policies. The recent near-collapse of global financial markets led to renewed scrutiny of executive compensation practices by journalists, academicians, politicians, and regulators.  Much of the scrutiny focused on alleged excesses in the compensation packages of the executives deemed (at least partially) responsible for the economic turmoil (e.g., Karaian, 2008; Rappeport, 2008; McCann, 2009). However, the financial crisis also highlighted the vulnerability of certain components of firm-specific executive wealth during times of financial distress as several prominent chief executive officers (CEOs) surrendered significant portions of their inside debt holdings (pension benefits and/or deferred compensation) when their firms failed during the crisis. Inside debt holdings are at risk because they generally represent unsecured and unfunded liabilities of the firm, rendering these executive holdings sensitive to default risk similar to that faced by other outside creditors (Sundaram and Yermack, 2007; Edmans and Liu, 2011).

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