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Changes to Spring Academic Calendar Fordham is modifying its academic calendar in anticipation of a national resurgence of the COVID-19 pandemic this winter. Full Details

Harry Newman and Emma Peng look at Top Management “Tournament” Incentives And Credit Ratings

Harry Newman and Emma Peng (joined by another co-author)’s paper, “Top Management Tournament Incentives and Credit Ratings” is to be published in 2020 in Review of Quantitative Finance and Accounting. It received the “Best Paper Award” at the 2018 Northeast Region Meeting of the American Accounting Association. This paper investigates whether the current level of “tournament incentives” for top executives is related to the firm’s future credit rating. Greater pay dispersion (their proxy for tournament incentives) has been found to be associated with both greater firm performance and riskiness. Taking the bondholders’ perspective, credit rating agencies would view increases in performance favorably and increases in riskiness unfavorably, leading to the empirical question of how pay dispersion affects a firm’s credit rating. They find strong evidence that pay dispersion is negatively associated with credit ratings. They also find that the negative impact of pay dispersion on credit ratings is stronger when firms have greater default risk. They also find weak evidence that strong shareholder rights accentuate the negative relation between pay dispersion and credit ratings.