Does a CEO’s hedging ability affect the firm’s capital structure?

I examine whether a CEO’s composition of firm stockholdings between restricted and unrestricted shares impacts the amount of leverage carried by the firm. I document a negative and statistically significant relationship between leverage and the proportion of CEO total shareholdings that are unrestricted, and this negative relationship holds for alternative measures of leverage. This result supports the notion that the composition of a CEO’s portfolio of firm stock between restricted and unrestricted shares is a significant determinant of leverage ratios.