Managerial compensation and capital structure: the impact of oprions on leverage decisions

The principal-agent problem and the resulting agency costs have always represented fundamental challenges in corporate governance, particularly in the context of managerial decision-making. This thesis explores how the structure of CEO remuneration influences corporate capital structure choices, with a focus on the impact of stock options on executives' risk preferences and leverage decisions. Unlike direct stock ownership, options become more valuable as stock price volatility increases, creating, in theory, an incentive for CEOs to pursue riskier financial strategies. This work starts with a theoretical description of agency costs, outlining their emergence in the literature and their development, describing the various types and the control mechanisms that can be put in place to mitigate their magnitude. It then goes on to study executive compensation, focusing on its components, controversies and regulatory aspects. Finally, the two arguments described above are combined, first from a theoretical and then from an empirical point of view, analysing how the possible incentives created by the salary structure could induce the manager to act in his own interests and not those of the company. By examining the intersection of executive pay and capital structure, this thesis provides an insight on how compensation design influences managerial behavior and corporate financial stability.