CEO Inside Debt and Risk Taking: Evidence From Property-Liability Insurance Firms

Andreas Milidonis, Takeshi Nishikawa, Jeungbo Shim
Journal of Risk and Insurance,In Press

We examine the incentive effects of CEO inside debt holdings (pensions and deferred compensation) on risk taking using the sample of US publicly traded property-liability insurers. To represent managerial risk taking, we employ value at risk (VaR) and expected shortfall (ES), which capture extreme movements in the lower tail of insurer stock return distribution. We also estimate firm default risk, equity volatilities, and insurance-related risk as alternative measures of risk taking. We document that inside debt …
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