# kaal:claim:2097160-036

**Claim.** Against the critique that long-term debt in pay does not deter short-run risky bets because expected short-term gains exceed the discounted value of the debt, adding early-trigger contingent convertible bonds changes managers' incentives by forcing them to weigh the effects of triggering events rather than only the debt to equity mix of their portfolio.

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

**Holds when.**

- early trigger attached to a substantial portion of the executive's debt holdings

**Source quote.**

> portion of executives' compensation packages could change managers' incentives. Executives would no longer simply focus on the debt versus equity portion of their portfolio; they would also consider the effects of triggering events.237

**From.** Wulf A. Kaal, *Contingent Capital in Executive Compensation* (2012), VI.A Contingent Capital as Inside Debt, page 59

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

**Keywords.** inside-debt, short-termism, triggering-events, risk-taking

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