We study the initiation effect of credit default swaps on CEOs performance-sensitive compensation and shareholder value. We find that the initiation effect of CDS contracts on CEO’s delta varies by the characteristics of firms. Firms with higher R&D and intangibles reduce CEO’s delta whereas...

In late 2008, a crisis of unprecedented proportion unfolded on Wall Street that called for the government bailout of institutions. Although the crisis wreaked havoc on the lives of firm stakeholders and taxpayers, many of the executives of these rescued firms received bonus compensation as the...