{
 "@context": "https://schema.org",
 "@type": "DefinedTerm",
 "@id": "https://wulfkaal.github.io/entities/inside-debt",
 "identifier": "kaal:entity:inside-debt",
 "name": "Inside debt",
 "termCode": "inside-debt",
 "inDefinedTermSet": {
  "@id": "https://wulfkaal.github.io/entities/index.json"
 },
 "author": {
  "@type": "Person",
  "name": "Wulf A. Kaal",
  "identifier": "https://orcid.org/0000-0003-0757-275X"
 },
 "dateModified": "2026-07-29",
 "canonicalForm": "https://wulfkaal.github.io/entities/inside-debt.md",
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 "additionalProperty": [
  {
   "@type": "PropertyValue",
   "name": "status",
   "value": "derived"
  },
  {
   "@type": "PropertyValue",
   "name": "claim_count",
   "value": 7
  },
  {
   "@type": "PropertyValue",
   "name": "work_count",
   "value": 1
  },
  {
   "@type": "PropertyValue",
   "name": "year_span",
   "value": [
    "2012",
    "2012"
   ]
  },
  {
   "@type": "PropertyValue",
   "name": "non_current_claims",
   "value": 0
  }
 ],
 "subjectOf": [
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-010",
   "identifier": "kaal:claim:2097160-010",
   "text": "Because the Barclays award falls away rather than converting, it does not create a fixed claim giving managers a stake in the firm's liquidation value, and therefore it does not lower agency cost.",
   "abstract": "it does not create a fixed claim for managers with a stake in the firm's liquidation value because it falls away when converted.141 Barclays's CCA, therefore, also does not lower agency cost.",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "contingent capital awards that lapse instead of converting"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-024",
   "identifier": "kaal:claim:2097160-024",
   "text": "Before conversion, executives holding securities with long-term maturities and coupon payments have incentives to manage the company with debt-holders' interests in mind.",
   "abstract": "Because executives would be holding securities with long-term maturities and coupon payments, executives would have incentives to manage the company with the interests of debt-holders in mind.184",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "before any conversion into equity",
    "strength depends on the proportion of debt in the package"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-032",
   "identifier": "kaal:claim:2097160-032",
   "text": "The governance benefits of traditional inside debt, incentive optimization and reduced agency costs, all depend on the entity remaining solvent, and inside debt supplies no mechanism of its own to ensure that solvency.",
   "abstract": "value and the associated governance benefits215 incentive optimization216 and reduction of agency costs217 depend on the solvency of the respective entity. Inside debt without a conversion feature provides no mechanism to ensure the solvency of the entity.",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "failure",
   "confidence": "argued",
   "is_failure_mode": true,
   "scope_conditions": [
    "inside debt without a conversion feature, such as pensions and deferred compensation"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-033",
   "identifier": "kaal:claim:2097160-033",
   "text": "Contingent convertible bonds with a conversion feature add what plain inside debt lacks: an early warning system and a buffer before insolvency that can help the entity avoid default.",
   "abstract": "Contingent convertible bonds with a conversion feature offer the additional benefit of creating an early warning system and a buffer before insolvency that can help an entity avoid default.218",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "conversion feature rather than write-down",
    "trigger set before insolvency"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-034",
   "identifier": "kaal:claim:2097160-034",
   "text": "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.",
   "abstract": "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",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "conversion occurs early, before bankruptcy"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-035",
   "identifier": "kaal:claim:2097160-035",
   "text": "Before conversion, contingent convertible bonds incentivize executives to lower risk-taking because their prices are sensitive to the downside risks of SIFIs, including default risk.",
   "abstract": "before conversion into equity, contingent convertible bonds can incentivize executives to lower their risk-taking because contingent convertible bond prices are sensitive to downside risks of SIFIs, including the risk of default.226",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "before conversion into equity",
    "market prices for the instrument are observable"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  },
  {
   "@type": "Claim",
   "@id": "https://wulfkaal.github.io/claims/2097160-036",
   "identifier": "kaal:claim:2097160-036",
   "text": "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.",
   "abstract": "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",
   "citation": "Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160",
   "datePublished": "2012",
   "claim_type": "mechanism",
   "confidence": "argued",
   "is_failure_mode": false,
   "scope_conditions": [
    "early trigger attached to a substantial portion of the executive's debt holdings"
   ],
   "source_pdf_sha256": "1e1f8aa246bce19f4658dbceb455c7c2a272aa5d63a9e9bdaa46a3a5a87680fc",
   "status": "current"
  }
 ],
 "description": "7 claims in the published works of Wulf A. Kaal carry the concept tag 'inside-debt'. Derived node: a roster, not an adjudicated definition."
}