The Influence of Equity Incentive on Corporate Debt Default Risk

Abstract

As researchers show more interest in debt default risk, work on influencing factors of this risk is put a particular emphasis. Because risk preference of management and corporate financial condition cannot be explained by their traits perfectly, this paper has argued association between equity and debt default risk. Selecting 323 listed enterprises as sample, the study uses descriptive analysis and multiple linear regression analysis to determine the relationship of these two indicators. According to the analysis results, large proportion of equity incentives to the total share capital has passive impact on financial condition. It brings heavy credit burden to companies while large proportion of managerial ownership can decrease debt default risk and promote the stability of financial system. This paper strengthens the idea that there is reasonable and significant association between equity incentive and debt default risk. It also proves that different measuring factors of equity incentive have different directions effects on corporate debt default risk.