Essays on CEO Compensation, Confidential Voting and Cost of Debt, and Dual Holding and Loan Structure
In chapter one, I examine firms that receive a shareholder proposal to see whether firms shift their executive pay so as to provide more deferred compensation and less cash when the firm is under scrutiny. After a shareholder proposal, we find an increase in performance-based compensation, as well as a decrease in annual salary; however, total compensation does not change significantly.
In chapter two, we examine the effect of confidential voting on voting outcomes and the cost of debt. We hypothesize that when firms do not allow for confidential voting, management follows a more self-dealing strategy. We find that, in the absence of confidential voting, firms with institutional dual holders have more votes for proposals. Further, firms with confidential voting in place have a lower cost of debt and this relation is stronger for firms with dual holders. The results are consistent with management trading a higher cost of debt.
In chapter three, we investigate the role of dual holder investors on loan contract. We try to see if the presence of dual holders in firms affects the selection of the optimal loan contracts. We find that the presence of dual holder and particularly commercial bank dual holder decreases the cost of the loan, increases the likelihood of the inclusion of dividend, financial or asset sweep covenants and makes the minimum current ratio covenant tighter. Therefore, lower cost of debt is achieved in the price of the less flexibility for firm's future activity. This is consistent with trade-off theory.