Abstract
We examine the impact of managerial risk exposure on capital structure selection by comparing a sample of 123 all-equity firms to a set of levered firms matched on the basis of industry, market cap and market-to-book assets. Net debt levels decline as CEO wealth sensitivity to stock price changes (delta) increases. However, we find no differences between the all-equity firms and their levered matching firms in terms of capital expenditures, R&D expense, return on assets, or long run stock price performance. The effect of managerial risk aversion in all-equity firms appears to be confined to financial policy.
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