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Purpose: This paper aims to examine the relationship between executive pay disparity and the cost of debt. Design/methodology/approach: The authors use a sample of syndicated bank loans granted to United States (US) listed firms from 1992 to 2014 and adopt the loan yield spread (Chief Executive Officer (CEO) pay slice) as the main proxy for the cost of debt (executive pay disparity). The authors also use the Heckman two-stage model to address the sample selection bias and the two-stage least squares and propensity score matching methods to control the potential endogeneity issues. To test different views about executive pay disparity, the authors adopt the cash-to-stock ratio to proxy for managerial risk-shifting incentives. Findings: The authors find that the cost of debt is significantly higher for firms with larger executive pay disparity, which is robust to sample selection bias, endogeneity concerns, alternative measures and various controls. This positive relationship increases w
This study aims to assess the impact of Environmental, Social, and Governance (ESG) ratings on the cost of debt of Indian firms from the year 2015 to 2020. One of the challenges that corporate India is going to face moving forward is that regulations with respect to environmental conservation, transparency, corporate social responsibility, and corporate governance will get stricter. This will undoubtedly push the companies to follow better ethical practices, adopt fair employee policies, and safeguard the environmental policies. So, this paper intends to evaluate the ESG lens of Indian companies concerning their financing decisions, viz the cost of debt. The firms under investigation are listed on the NIFTY 500, which reflects the top 500 companies in the eligible universe based on complete market capitalization. Data was sourced from the Bloomberg database. The paper uses cost of debt as the dependent variable; ESG score & individual E, S, G scores as independent variables; Market
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