Agency cost of debt as incentive for executive inside debt: Evidence from empirical study The substantial holdings of inside debt cause both academia and industry to wonder about the reasons. Jensen and Meckling (1976) suggest that debt-like compensation could lower the agency cost of debt. Nevertheless, empirical evidence is still lacking for whether the management really chooses to use inside debt as mitigation of agency cost of debt. In this study, recently published in our journal Corporate Ownership and Control, the author from the USA uses the value of non-tax-deductible deferred compensation from the ExecuComp database as the measure of inside debt, leverage as the proxy for agency cost of debt, and examines the causal effect of changes in leverage on inside debt. Using phased increases in corporate income taxes in US states between 2006 and 2016 using difference-in-differences regression, the author identifies the causal effect of tax-motivated corporate leverage on the balance of deferred compensation. Firms increase their deferred compensation balance by $85,000 with a 1% increase in leverage. This finding implies changes in the agency cost of debt as a potential reason for variations in inside debt values and provides evidence for Jensen and Meckling’s (1976) theory. #corporategovernance #debt #agencycosts #boardofdirectors #finance Find the full-text paper below https://lnkd.in/drX84AVs
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Our course tackles debt disclosure and presentation, including debt covenant compliance and liability classification, informing financial decision-making and economic outcomes. Register today https://bit.ly/3YkFBKH
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Senior Financial Advisor at Wells Fargo Advisors Financial Network, LLC. Helping families, business owners, executives build, protect, and transition wealth.
I find this article interesting, fixed vs variable debt in the US economy.
Household Debt Is Mainly Fixed Rate - Apollo Academy
https://apolloacademy.com
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Can the “Do Nothing Congress” pass legislation by June 21 to save Subchapter V’s existing expanded cap? By James Hinds A bipartisan group of senators introduced the Bankruptcy Threshold Adjustment Extension Act to extend the sunset dates for Subchapter V and Chapter 13 relief to 2026. The current debt thresholds are set to expire on June 21, 2024, which would significantly impact eligibility limits. Unless Congress acts, the current debt thresholds to qualify for Subchapter V ($7,500,000.00) and Chapter 13 ($2,75,000.00) relief will sunset on June 21, 2024. The Subchapter V debt limit will drop to $3,024,725. The Chapter 13 threshold of $2,750,000 for both secured and unsecured debt will revert to a two-part test that limits eligibility to a maximum of $465,275 for unsecured debt and $1,395,625 for secured debt. The debt limits for Subchapter V and chapter 13 will expire on June 21, 2024, but a bill to extend the existing caps for two more years is being blocked by one senator. Without a viable path through the Senate, it is unlikely that the bill could be sent to President Biden’s desk before the sunset occurs, given that the House is in recess next week. Let's see if Congress can come together to prevent this setback. #Congress #Legislation #Bankruptcy #SubchapterV #Chapter13
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Draft PCG on new Debt Deduction Creation Rule was released for comments on Thursday 10 October. Comments are due on 8 November. Debt restructures may be difficult to categorise... to be low risk, they will need to: 1. have accurately calculated debt deductions disallowed by the rule prior to the restructure; 2. have no Part IVA application (or potential application?) prior to restructure; 3. occur in a straightforward manner using arm's length terms and without any associated contrivance or artificiality; and 4. have no part IVA application (or potential application?) going forward. .....
Australia’s new thin capitalisation regime: ATO releases draft guidance on restructures
pwc.com.au
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As a young professional, understanding debt is crucial for your financial health. While it can be tempting to take on loans for education, a car, or other expenses, it's important to manage this debt strategically. Before taking any steps, it's important to research about the debt that you are opting for and how it will affect your finances in the long run. For example the repo rate and prime rate change time and again,and irregardless of those changes the instalments still have to be paid. Before taking any debt, please plan for it by a drafting a budget to ensure that you don't spend beyond your means.
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"Every accomplishment starts with the decision to try" John F. Kennedy --- and success comes from vision, dedication, and teamwork.
For awareness, while we focus on hopefully continued federal funding post-12/20/24 (expiration of the current FY 2025 Continuing Resolution/CR), another MAJOR pending Congressional action is extending the current suspension of or raising the Debt Ceiling. Congress passed a “moratorium” on (suspended) the Debt ceiling UNTIL 1/1/2025. If not extended or the ceiling is NOT raised, the Department of the Treasury WILL NOT be able to borrow funds (cash) above this limit and thus, NOT be able to pay its bills (exceeding its Debt authority based on its current legal liabilities). This article highlights the subsequent actions if no action. https://lnkd.in/ef7bhhSG
Q&A: What You Need to Know About the 2025 Debt Limit - BPC Action
https://bpcaction.org
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Industry consultant helping consumer goods and services companies accelerate sales growth
What’s a Trillion dollars amongst friends? I believe debt matters, and government simply printing money will have consequences in time. Recognize governments love to kick the can down the road (globally), but eventually the road ends, and the kick will fall off a cliff. It is simply not sustainable. #debt #government #governmentdebt #debtmatters CNBC https://lnkd.in/gepUy9ac
Interest payments on the national debt top $1 trillion as deficit swells
cnbc.com
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When is our government spending too much? The U.S. government is spending more money than it collects, and as a result, it is issuing concerning levels of debt. Our new special report answers the top questions investors are asking about the risks of unsustainable spending.
Special Report: Q&A — Addressing concerns about rising U.S. debt
saf.wellsfargoadvisors.com
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Why will debt disappear as a corporate and government funding instrument in Epistemonomy? Debt is an affordable funding instrument within the artificial construct of capitalism with legalized features like Limited Liability, Monetary Unit Principle, Going Concern Presumption, and, most importantly, the non-accrual of the Contingent Economic Cost (CEC) of assumptions in double-entry accounting. However, after stripping away all these artificial elements in the normative framework of an Epistemonomic economy and the context of the Uncertainty Lifecycle, the cost of debt funding will become prohibitively high. However, debt will continue to be a significant corporate funding instrument in capitalist political economies.
