Managerial ability and bank‐loan pricing

Franco, Gus De; Hope, Ole‐Kristian; Lu, Haihao

doi:10.1111/jbfa.12267

Cited by 71 publications

(19 citation statements)

References 58 publications

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“…Furthermore, we retain only bonds and syndicated loans issued by public nonfinancial firms (e.g. De Franco et al, 2017). To match bond issues from TR Eikon with firms covered by Worldscope we use several identifiers (Bond ISIN, issuer ticker, ticker symbol) and company name as matching criteria (Florou & Kosi, 2015;Anagnostopoulou, 2017).…”

Section: Sample Selectionmentioning

confidence: 99%

“…To test the effect of capitalized R&D on the price terms of bonds and syndicated loans, we followed prior research and performed this analysis on an issue-level (Bharath et al, 2008;Florou & Kosi, 2015;De Franco et al, 2017). Consequently, we retained all bonds and syndicated loans a firm issued in a year, as debt issues differ in their contractual terms, for instance in price, borrowed amount, maturity and special features.…”

Section: Sample Selectionmentioning

confidence: 99%

“…Details on the rationale and theoretical justifications for the inclusion of the control variables in relation to the cost of public debt can be found in Bharath et al (2008), Eberhart et al (2008), Florou and Kosi (2015), Ge and Liu (2015), Franco et al (2016) and Ball et al (2017). Details in relation to control variables for the cost of syndicated loans can be found in Bharath et al, (2008), Florou and Kosi (2015), Anagnostopolou (2016), Ciftci & Darrough (2016), Brown (2016), Franco et al (2016) and De Franco et al (2017).…”

Section: Hypotheses 2 and 3 -Randd Capitalization And The Cost Of Debtmentioning

confidence: 99%

“…We followed prior literature (e.g., Shi, 2003;Eberhart et al, 2008;Florou & Kosi, 2015;Ciftci & Darrough, 2016;Francis et al, 2017;De Franco et al, 2017) in estimating equation ( 4) at an issue-level. Accordingly, we included all bonds and syndicated loans a firm issued within a year, as debt issues differ in their contractual terms.…”

Section: Hypotheses 2 and 3 -Randd Capitalization And The Cost Of Debtmentioning

confidence: 99%

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Development Costs Capitalization and Debt Financing

2018

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This study investigates debt market effects of research and development (R&D) costs capitalization, using a global sample of public bonds and private syndicated loans issued by public non-financial firms. Firstly, we show that firms capitalize larger amounts of R&D in a year when they exhibit a propensity for issuing bonds, rather than borrowing funds privately from the syndicated loan market, in the subsequent year. Secondly, we provide evidence that capitalized R&D investments reduce the cost of debt. We infer that debt market participants are able to identify firms' motives for R&D capitalization, as we find a reduction in the cost of debt only for those firms that do not show indications of employing R&D capitalization for earnings management reasons. Indeed, only for this sub-sample of firms, the amount of capitalized R&D contributes positively to future earnings. We confirm that R&D capitalization is positively associated with audit fees and thus can be deemed to be a signaling device. Lastly, we find that it is the amount of R&D a firm is expected to capitalize and not the discretionary counterparts, which facilitates a firm's access to public debt markets, reduces bond and syndicated loan prices, and contributes to future benefits.

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Section: Sample Selectionmentioning

confidence: 99%

Section: Sample Selectionmentioning

confidence: 99%

Section: Hypotheses 2 and 3 -Randd Capitalization And The Cost Of Debtmentioning

confidence: 99%

Section: Hypotheses 2 and 3 -Randd Capitalization And The Cost Of Debtmentioning

confidence: 99%

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Development Costs Capitalization and Debt Financing

2018

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“…These studies have documented that managerial ability has a distinctive effect on a firm's financial reporting quality and earnings quality (Demerjian et al, 2013;Huang & Sun, 2017;Wang, Chen, Chin, & Zheng, 2017), earnings management activities (Skousen, Sun, & Wu, 2019), accounting and disclosure policies (Abernathy et al, 2018;Baik et al, 2011;Luo & Zhou, 2017;Sun, 2016), information environment (Baik et al, 2018), tax avoidance behaviour (Koester, Shevlin, & Wangerin, 2017), investment practices (Andreou et al, 2017;Gan, 2019;García-Sánchez & García-Meca, 2018;Habib & Hasan, 2017;Lee et al, 2018), risk-taking behaviour (Andreou et al, 2016;Yung & Chen, 2018), innovation activities (Y. Chen, Podolski, & Veeraraghavan, 2015), credit ratings (Bonsall, Holzman, & Miller, 2017;Cornaggia, Krishnan, & Wang, 2017), structure and pricing of debt (Bui, Chen, Hasan, & Lin, 2018;De Franco, Hope, & Lu, 2017;Petkevich & Prevost, 2018), dividend policies (Guan, Li, & Ma, 2018;Jiraporn, Leelalai, & Tong, 2016); audit fees (Gul, Khedmati, Lim, & Navissi, 2018;Li & Luo, 2017); firm performance (Banker, Darrough, Huang, & Plehn-Dujowich, 2013;Cox, 2017;Demerjian et al, 2012;Francis, Hasan, Mani, & Ye, 2016), and corporate social responsibility (CSR) performance (Chatjuthamard, Jiraporn, Tong, & Singh, 2016;García-Sánchez, Hussain, & Martínez-Ferrero, 2019;…”

Section: Managerial Ability and Investmentmentioning

confidence: 99%

Managerial Ability and Firm Performance: A Labour Management Perspective.

Yu¹

2020

Preprint

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We address the question how high ability managers achieve superior performance outcomes to their peers by examining how labour investment decisions and labour management outcomes differ based on managerial ability. We build on previous research that predicts expected labour investment (net hiring) based on economic factors and demonstrates that deviations from expected labour investment negatively affect future performance. A prediction based on this research is that deviations from expected labour investment decrease with managerial ability, with the associated consequence that performance is better for companies that deviate less from expected labour investment levels. But this linear prediction is limiting because, if high ability managers only match expected labour investment better than other managers, they would not perform much differently from other managers. High ability managers must see opportunities that are not readily apparent to other managers and take actions based on those opportunities. Therefore, we predict a non-linear relation between deviations from labour investment and managerial ability-that, up to a point, deviations from expected labour investment decrease with managerial ability but that deviations increase at high levels of managerial ability. A corresponding prediction is that deviations from expected labour investment that are made by higher ability mangers have a positive impact on future firm performance. We find support for both these predictions, whether deviations are negative or positive, consistent with high ability managers recognizing opportunities differently from other managers and achieving better performance outcomes when they deviate from expected labour investment.

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Do analysts follow firms with able managers?

Gao

Wang

et al. 2020

Manage Decis Econ

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Although previous studies suggest that management quality impacts analyst behavior, there is a dearth in direct empirical evidence that proves this. A sample of listed Chinese firms over the period 2008–2016 proves that a firm with highly skilled managers draws more analysts. We use an instrumental variable approach to mitigate endogeneity issues. Tests show that the positive impact of managerial ability on analyst following is more salient in firms with no political connections and firms located in regions with developed formal institutions. Firms with high‐capability managers help analysts improve their forecast accuracy and lower the dispersion of their opinions.

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Managerial ability and bank‐loan pricing

Cited by 71 publications

References 58 publications

Development Costs Capitalization and Debt Financing

Development Costs Capitalization and Debt Financing

Managerial Ability and Firm Performance: A Labour Management Perspective.

Do analysts follow firms with able managers?

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