# Inside debt

`kaal:entity:inside-debt`

**Status.** derived

This node is assembled mechanically from the 7 claims that carry the concept tag `inside-debt`. It is a roster of what the corpus says under this term. It is **not** an adjudicated definition: no single statement here has been ruled canonical, and no first-appearance call has been made. Read the claims and judge for yourself.

## Every claim under this term

7 claims across 1 works, 2012 to 2012.

**2012**

- [2097160-010](https://wulfkaal.github.io/claims/2097160-010) [failure/argued] *(failure mode)* -- 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.
  > 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.
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2097160-024](https://wulfkaal.github.io/claims/2097160-024) [mechanism/argued] -- Before conversion, executives holding securities with long-term maturities and coupon payments have incentives to manage the company with debt-holders' interests in mind.
  > 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
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2097160-032](https://wulfkaal.github.io/claims/2097160-032) [failure/argued] *(failure mode)* -- 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.
  > 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.
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2097160-033](https://wulfkaal.github.io/claims/2097160-033) [mechanism/argued] -- 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.
  > 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
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2097160-034](https://wulfkaal.github.io/claims/2097160-034) [mechanism/argued] -- 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.
  > 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
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2097160-035](https://wulfkaal.github.io/claims/2097160-035) [mechanism/argued] -- 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.
  > 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
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160
- [2097160-036](https://wulfkaal.github.io/claims/2097160-036) [mechanism/argued] -- 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.
  > 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
  Wulf A. Kaal, Contingent Capital in Executive Compensation (2012). SSRN: https://ssrn.com/abstract=2097160

## Verify

Every claim above resolves to a record carrying a verbatim source quote, the sha256 of the source PDF, and a preformatted citation. Nothing here asks to be taken on trust.

    curl -s https://wulfkaal.github.io/entities/inside-debt.md | sha256sum

**Canonical form.** This markdown file is the canonical hashed representation of this entity node. Its sha256 is the content hash.