Agency theory posits that debt-like compensation (such as defined-benefit pensions and other deferred compensation) aligns managerial interests more closely with those of debtholders and reduces the agency cost of debt. Consistent with theory, we find that a higher CEO relative leverage, defined as the ratio of the CEO's inside leverage (debt-toequity compensation) to corporate leverage, is ass...

Wealth distribution has always been an important issue in our economic and social life, since it affects the harmony and stabilization of the society. Under the background of widely used financial tools to raise leverage these years, we studied the leverage effect on wealth distribution of a population in a controllable laboratory market in which we have conducted several human experiments, and...

This paper introduces a new methodology for measuring and analyzing capital structure effects on option prices of individual firms in the economy. By focusing on individual firms we examine the cross sectional effects of leverage on option prices. Our methodology allows the market value of each firm’s debt to be implied directly from two contemporaneous, liquid, at-the-money option prices witho...