Debt maturity choice in CEOs’ incentive to signal abilities

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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.

Original languageEnglish
Pages (from-to)632-648
Number of pages17
JournalAsia-Pacific Journal of Accounting and Economics
Volume29
Issue number3
DOIs
StatePublished - 2022

Keywords

  • CEO ability
  • Debt maturity choice
  • information opacity
  • rollover risk

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