Debt maturity choice in CEOs’ incentive to signal abilities

Chih-Wei Wang

Asia-Pacific Journal of Accounting & Economics, 2022, vol. 29, issue 3, 632-648

Abstract: This research examines the effect of CEOs’ ability concerning their debt maturity choice. Examining public firms over the period 1997–2016 in Taiwan, we find that high-ability managers choose short-term debt financing to signal their ability. We adopt the rollover risk channel to prove that managers signal their ability on the use of short-term debt are only from their intention. In addition, we consider the separation of ownership and control as well as information opacity, which could force managers to have a greater incentive to use short-term debt for signaling their ability to align the managers-shareholders conflict and maintain their reputation, compensation, and bonus from being affected by information opacity.

Date: 2022
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DOI: 10.1080/16081625.2020.1754258

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Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

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