High Debt Levels Can Drive Risky Investments, Impacting Firm Stability
The study looks at how manager pay, debt, and investment choices are connected. Managers with stock-like pay tend to take more risks in investing. Debt can make managers less risky if they have something to lose if the company fails. But too much debt can make investments riskier. Bank loans and market loans can change how much debt is used and how risky investments are.