Influence of Managerial Compensation on Capital Structure Decision
Throughout existing literature, the static trade-off theory and the pecking order theory are the main explanatory theories for capital structure. At the same time, researchers have aimed to find determinants of the capital structure decision. Most of the found determinants are based on firm specific characteristics. This study contributes to this research for determinants by investigating whether there is a relation between (different types of) managerial compensation and capital structure. First finding is that that there is a negative and significant relation between total compensation and several debt-to-equity ratios, but that the explanatory power of this relation is very limited. Second finding is that this study does not find a significant relation between the proportion of equity-linked compensation and capital structure.
Faculteit der Managementwetenschappen