# kaal:claim:2097160-034

**Claim.** Unlike the liquidation value backing traditional inside debt, equity received by executives on early conversion can still appreciate, because the early trigger creates a substantial buffer before insolvency.

**Type.** mechanism  **Support.** argued

**Holds when.**

- conversion occurs early, before bankruptcy

**Source quote.**

> Unlike the liquidation value of traditional inside debt, the equity in executives' portfolios after the conversion of the contingent convertible bonds can still be increased because the early trigger creates a substantial buffer before insolvency.222

**From.** Wulf A. Kaal, *Contingent Capital in Executive Compensation* (2012), VI.A Contingent Capital as Inside Debt, page 56

**Cite as.** Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160

**Verify.** sha256 of source PDF `1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc` at https://raw.githubusercontent.com/wulfkaal/Academic-Papers/main/papers/pdf/Kaal%20-%202012%20-%20Contingent%20Capital%20in%20Executive%20Compensation.pdf

**Topics.** contingent-capital, risk-and-incentives

**Keywords.** inside-debt, liquidation-value, early-trigger, management-incentives

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