Debt maturity choice in CEOs’ incentive to signal abilities

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.