|Title:||Can lenders discern managerial ability from luck? Evidence from bank loan contracts||Authors:||Bui D.G.
|Keywords:||Agency and information risk;Corporate governance;Managerial ability;Stakeholder relationship;The cost of debt||Issue Date:||2018||Journal Volume:||87||Start page/Pages:||187-201||Source:||Journal of Banking and Finance||Abstract:||
We investigate the effect of managerial ability versus luck on bank loan contracting. Borrowers showing a persistently superior managerial ability over previous years (more likely due to ability) enjoy a lower loan spread, while borrowers showing a temporary superior managerial ability (more likely due to luck) do not enjoy any spread reduction. This finding suggests that banks can discern ability from luck when pricing a loan. Firms with high-ability managers are more likely to continue their prior lower loan spread. The spread-reduction effect of managerial ability is stronger for firms with weak governance structures or poor stakeholder relationships, corroborating the notion that better managerial ability alleviates borrowers�� agency and information risks. We also find that well governed banks are better able to price governance into their borrowers�� loans, which helps explain why good governance enhances bank value. ? 2017 Elsevier B.V.
|Appears in Collections:||財務金融學系|
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