Abstract
This paper investigates the relationship between CEO and top executive ownership and the choice between secured and unsecured debt financing. Although prior research has found that debt structure affects agency costs and firm value, the relationship between executive ownership and debt preferences remains open to debate. We find that an increase in executive ownership results in a higher percentage increase in the use of secured debt, which may be attributed to the managerial effort-enhancing behaviour that results from collateralized debt. Additionally, we find that firms in financial distress tend to rely more heavily on secured debt. Our results contribute to understanding how managerial incentives influence capital structure decisions and the determinants of debt security choices.