Colonnello, Stefano2025-05-282016https://epflicht.bibliothek.uni-halle.de/handle/123456789/2896855933755urn:nbn:de:gbv:3:2-533362402591I model the joint effects of debt, macroeconomic conditions, and cash flow cyclicality on risk-shifting behavior and managerial pay-for-performance sensitivity. I show that risk-shifting incentives rise during recessions and that the shareholders can eliminate such adverse incentives by reducing the equity-based compensation in managerial contracts. I also show that this reduction should be larger in highly procyclical firms. Using a sample of U.S. public firms, I provide evidence supportive of the model’s predictions. First, I find that equity-based incentives are reduced during recessions. Second, I show that the magnitude of this effect is increasing in a firm’s cash flow cyclicality.1 Online-Ressource (52 Seiten = 0,99 MB) : Illustrationenenghttp://rightsstatements.org/vocab/InC/1.0/330Book