I examine the determinants of equity's absolute priority deviation in 75 bankruptcies. Previous research emphasizes the value of the shareholders' option to delay a reorganization. In practice, managers control this option, and agency problems between managers and shareholders can be severe in...

We examine managerial compensation and wealth sensitivities around CEO changes. The average new CEO is incentivized to increase the risk of the firm primarily because he holds significantly less stock than his predecessor, and in fact riskier policy choices are subsequently implemented. Similar...

Financial theory holds that firms can control agency costs through the use of short-term and secured debt. We examine the relation between the use of secured debt and the incentive of the manager to increase the risk of the firm, as measured by vega. We find that firms utilize secured debt to a...