科学研究

Jieying Hong is an associate professor at School of Economics and Management, Beihang University. Her research interest covers corporate finance, behavioral finance and Fintech. In the corporate finance area, she applies contract theory and build models to study the optimal corporate decisions. She also empirically studies the real effects of financial derivatives, including options and CDS, on corporate decisions. In behavioral finance area, she studies the implications of asymmetric information and bounded rationality on asset pricing. Currently, she is particularly interested in studying the implications of machine learning on the risk management decisions of financial institutions.

What is the role of creditors in shaping the design of managerial compensation? This paper provides empirical evidence by investigating how the trading of credit default swaps (CDS) shapes the design of CDS-referenced firm’s managerial compensation, especially its risk-taking incentives. We find that CEO compensation vega increases significantly when a firm has CDS referring its debt, and the causal relationship is verified by a set of endogeneity tests. The CDS effect is stronger for firms with larger risk-shifting agency conflict, consistent with the view that the alleviation of creditors’ risk concerns is the main mechanism driving this effect. Additionally, we document that the increase in CEO compensation vega caused by CDS trading results into more risk taking, which, however, does not lead to an improvement in firm performance and shareholder value.