{"title":"Torn between two debt types? The role of managerial ability in a firmʼs choice between bank loans and public debt","authors":"Muhammad Kabir , Dewan Rahman , Taher Jamil","doi":"10.1016/j.jbankfin.2024.107205","DOIUrl":null,"url":null,"abstract":"<div><p>Motivated by the theoretical literature on firms' choice between bank loans and public debt, this paper analyzes whether more able managers choose a higher fraction of public debt. We find that firms with more able managers choose a higher level of public debt. We also find that the use of public debt by more able managers is positively associated with wealth creation for shareholders and negatively associated with bankruptcy risk. Our cross-sectional analyses suggest that this baseline relationship is conditional on a better information environment. We address endogeneity issues in multiple ways and run an extensive array of robustness checks. Overall, our findings are consistent with the prediction that managerial ability mitigates the information monopoly of banks.</p></div>","PeriodicalId":48460,"journal":{"name":"Journal of Banking & Finance","volume":"164 ","pages":"Article 107205"},"PeriodicalIF":3.6000,"publicationDate":"2024-05-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://www.sciencedirect.com/science/article/pii/S0378426624001225/pdfft?md5=0aaa5ccbcf6b75c3f6c4203ab2146b88&pid=1-s2.0-S0378426624001225-main.pdf","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Banking & Finance","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0378426624001225","RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
Motivated by the theoretical literature on firms' choice between bank loans and public debt, this paper analyzes whether more able managers choose a higher fraction of public debt. We find that firms with more able managers choose a higher level of public debt. We also find that the use of public debt by more able managers is positively associated with wealth creation for shareholders and negatively associated with bankruptcy risk. Our cross-sectional analyses suggest that this baseline relationship is conditional on a better information environment. We address endogeneity issues in multiple ways and run an extensive array of robustness checks. Overall, our findings are consistent with the prediction that managerial ability mitigates the information monopoly of banks.
期刊介绍:
The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal''s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal''s purpose is to improve communications between, and within, the academic and other research communities and policymakers and operational decision makers at financial institutions - private and public, national and international, and their regulators. The Journal is one of the largest Finance journals, with approximately 1500 new submissions per year, mainly in the following areas: Asset Management; Asset Pricing; Banking (Efficiency, Regulation, Risk Management, Solvency); Behavioural Finance; Capital Structure; Corporate Finance; Corporate Governance; Derivative Pricing and Hedging; Distribution Forecasting with Financial Applications; Entrepreneurial Finance; Empirical Finance; Financial Economics; Financial Markets (Alternative, Bonds, Currency, Commodity, Derivatives, Equity, Energy, Real Estate); FinTech; Fund Management; General Equilibrium Models; High-Frequency Trading; Intermediation; International Finance; Hedge Funds; Investments; Liquidity; Market Efficiency; Market Microstructure; Mergers and Acquisitions; Networks; Performance Analysis; Political Risk; Portfolio Optimization; Regulation of Financial Markets and Institutions; Risk Management and Analysis; Systemic Risk; Term Structure Models; Venture Capital.