Executive compensation influences managerial risk preferences through the executive's portfolio sensitivities to changes in stock prices (delta) and stock return volatility (vega). Large deltas discourage managerial risk-taking, while large vegas encourage risk-taking. Theory suggests that...

This paper examines how CEO overconfidence affects firms' choice of debt issuance among private debt (i.e., bank loan and non-bank loan) and public bond. Using a sample of U.S. rated public firms, we find that firms with overconfident CEOs tend to issue more private debt and issue private debt...