We examine how executive compensation affects the cost of debt financing. Analyzing CEO pay data from the UK, we find that debt-like and equity-like pay components have opposite effects on the cost of debt. An increase in defined benefit pensions is associated with lower bond yield spread, while an increase in executive stock options intensifies it. In addition, we find some evidence that cash bonus is negatively associated with the cost of borrowing. We do not observe any relation between restricted stock grants and the cost of debt financing. Our results suggest that bondholders are fully aware of both risk-taking and risk-avoiding incentives created by various executive pay components.

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This paper examines daily share price and daily trading volume behaviour associated with a sam ple of trading suspensions on the Amsterdam Stock Exchange. Our results indicate that sus pensions are associated with significant price changes, and are neither preceded by any antici patory price-behaviour, nor followed by signifi cant abnormal returns. These suggest that new information is disclosed during the suspension period, and the nearly complete impact of infor mation release takes place instantaneously. We also observe an increase in trading volume with the occurrence of suspension. This reinforces the evidence of significant information release during trading suspensions on the Amsterdam Stock Ex change.