Executive Loans

Posted: 18 Jul 2003

See all articles by Kathleen M. Kahle

Kathleen M. Kahle

University of Arizona - Department of Finance; European Corporate Governance Institute (ECGI)

Kuldeep Shastri

University of Pittsburgh - Finance Group

Date Written: February 2003

Abstract

This paper analyzes the characteristics and impact of loans made to executives for purposes of stock purchase, option exercise and relocation. We find that loans made to assist executives in purchasing stock or excercising options are larger and have higher interest rates than relocation loans. All types of loans, however, are issued at below-market interest rates, on average. We also find while stock purchase loans are given to managers with low existing ownership, option exercise loans are given to managers with high existing ownership and high cash compensation. Finally, our results indicate that executive stock ownership increases follwong stock purchase and option exercise loans. For managers as a whole, a loan that enables a manager to buy 100 shares of stock results in only an eight-share increase in ownership. However, the relation between ownership changes and stock purcahse loans is much stronger for low ownership managers.

Suggested Citation

Kahle, Kathleen M. and Shastri, Kuldeep, Executive Loans. Available at SSRN: https://ssrn.com/abstract=569765

Kathleen M. Kahle (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7489 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Kuldeep Shastri

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)
412-648-1693 (Fax)

HOME PAGE: http://www.pitt.edu/~ks112354

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