| Companies whose CEOs have borrowed 100% of the value of their homes have debt ratios that are 7.2 percentage points higher, on average, than those of comparable firms led by CEOs with zero mortgage debt, says a team led by Henrik Cronqvist of Claremont McKenna College. In their study of chief executives of large U.S. firms, the researchers found that, overall, bosses tend to push their companies' capital structures toward the debt levels they feel comfortable with in their personal lives. A strong board can reduce the value-destroying effect of this practice, the researchers say. |
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