Do firm characteristics affect debt capacity? Evidence in CEO succession

Chien-Chiang Lee (), Chih-Wei Wang, Chi Yin and Min-Rui Choo

Applied Economics, 2021, vol. 53, issue 48, 5567-5583

Abstract: Should firms decrease or increase their debt capacity after professional CEO succession? Examining a sample of all publicly traded firms from 1991 to 2016 in Taiwan, this research finds that firms with professional CEO successors tend to raise less debt and consider the succession of professional managers to be more conservative because they are afraid of being monitored more severely. From the perspectives of firms’ characteristics, those with professional CEO successors and high cash holdings and investment levels are more likely to increase their debt capacity, while those of a larger size and higher post-succession profitability volatility decrease their ability at raising debt. Finally, we hand-collect data and develop a novel method to identify the real founders and reconfirm our empirical evidence. Our findings present financial implications for boards of directors which they can evaluate firms’ cash holdings, investment level, firm size, and profit volatility before deciding on whether to name a CEO successor to take over their firms.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2021.1925626 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:53:y:2021:i:48:p:5567-5583

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2021.1925626

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().