CorrespondenceOle-Kristian Hope, Rotman School of Management, University of Toronto and BI Norwegian Business School. AbstractThis paper examines the impact of borrowers' managerial ability on lenders' bank-loan pricing and the channels through which managerial ability affects bank-loan pricing. Using a large sample of US bank loans, we provide evidence that higher managerial ability is associated with lower bank-loan prices. This effect is stronger in firms with high information risk, suggesting that an important channel for managerial ability to affect bank-loan pricing is through improved financial disclosure to mitigate information asymmetry. The relationship is also stronger for firms with weak business fundamentals, implying that another channel is through improved business performance.Of these two mechanisms, path analysis suggests that the businessfundamentals mechanism is the more important channel through which managerial ability affects bank-loan pricing.

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We appreciate valuable comments from Russel Lundholm (the Editor), an anonymous reviewer, Gus

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