Managerial Ability and External Financing

Min-Rui Choo (), Chih-Wei Wang (), Chi Yin () and Jie-Lun Li ()
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Min-Rui Choo: National Sun Yat-Sen University
Chih-Wei Wang: National Central University
Chi Yin: National Sun Yat-Sen University
Jie-Lun Li: National Sun Yat-Sen University

Asia-Pacific Financial Markets, 2021, vol. 28, issue 2, No 3, 207-241

Abstract: Abstract This research examines the link between managerial ability and firms’ external financing. Our findings show that firms with more able managers tend to mitigate information risk by reducing their loan financing and increasing equity financing. These findings are more prominent for financially unconstrained and well-governed firms, suggesting that high-ability managers are more apt to use equity financing as a financial source in firms with better financial and governance quality. To address potential endogeneity problems, we document that the impact of managerial ability on external financing remains unchanged after we employ yearly regression, change analysis, quantile regression, and the instrumental variable approach.

Keywords: Managerial ability; Loan financing; Equity financing; Financial constraint; Corporate governance (search for similar items in EconPapers)
JEL-codes: G21 G32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s10690-020-09313-5

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