CEO Incentives And Firm Behavior: Insights From Crisis And Policy Interventions

This dissertation explores how CEO incentives shape corporate decision-making under two distinct yet significant external forces: a global crisis and government intervention. The first essay investigates the role of CEO inside debt in corporate risk-taking during the COVID-19 pandemic. Using a comprehensive panel of U.S. firms from 2006 to 2023, the study finds that firms led by CEOs with greater inside debt holdings exhibited more conservative behaviors during the crisis, reflected in lower future stock return volatility, reduced R&D spending, and decreased financial leverage. These effects are particularly pronounced in firms with greater financial flexibility, such as high cash reserves or low leverage. The second essay examines how government subsidies influence the structure of CEO compensation. Analyzing data from U.S. firms between 1999 and 2022, the study shows that subsidies reduce the use of cash compensation while increasing equity- and option-based pay. This shift in pay structure encourages greater risk-taking, consistent with the rent extraction view. Together, these studies offer new insights into the complex ways executive incentives interact with firm responses to macroeconomic shocks and policy interventions, with implications for corporate governance, risk management, and regulatory design.