Contrary to other forms of outside financing, the announcement of a bank loan agreement prompts a positive and significant market return. Throughout the literature, bank loans are deemed special and unique due to multiple benefits accruing to bank borrowers. The short-term positive market reaction is however inconsistent with the long-term underperformance of borrowing firms (Billet et al., 2006). We find that unlike shareholders, CEOs gain from the bank loan relation over the long-term. Specifically, we find that bank loan agreement elicits a significant increase in total compensation through an increase in non-performance based compensation components such as salary, bonus and other compensation. We also report a smaller proportion of performance based compensation following the bank agreement. Generally, the results suggest that subsequent to a major bank loan, CEOs seem to gain enough influence to shield their compensation from the firm \u27s underperformance. In particular this evidence supports the uniqueness of bank loan relations
