... 7 2020 2021 agency conflict managerial compensation vega operating risks investment policy asset substitution bankruptcy credit default swap (CDS) In this study, we examine whether and how stringent lender monitoring reduces the efficacy of risk-inducing incentives put...

... past lending relationships. We show that the borrower has a stronger incentive to engage in a suboptimal investment decision (i.e., asset substitution) ex post when the lender lacks incentive to truthfully reveal this information. We identify conditions under which, ex ante...