[EN] Coordination problems amongst creditors are reduced when a firm’s debt structure is concentrated
in fewer debt types. Using a sample of US non-financial firms, we show that an increase in risktaking
incentives in CEO pay is associated with a greater debt concentration by debt type. This
result holds in various settings that account for endogeneity and is primarily driven by pay
incentives embedded in vested options that are expected to favor business choices with more
immediate negative effects on debtholders’ wealth. Further, our findings are stronger for firms
with a higher default risk where coordinated efforts amongst creditors become more pressing. A
final test documents that a more concentrated debt structure reduces the negative influence of
CEO risk-taking incentives on debtholder wealth thus highlighting the advantages of lower
coordination problems amongst creditors
