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Inside Debt and the Design of Corporate Debt Contracts
Social Science Research Network
T heory posits that managerial holdings of debt ("inside debt") align managers' incentives with those of outside debtholders. Executive pensions, consisting of rank-and-file (RAF) plans and supplemental executive retirement plans (SERPs), and other deferred compensation (ODC) have debt-like payoffs, and could therefore function as inside debt. However, whereas SERPs are often unfunded and unsecured, RAF plans are funded and secured to some extent, and ODC may be invested in equity and withdrawndoi:10.2139/ssrn.1743634 fatcat:yzvus3femnbo5d4a5evxd2kbpy