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Asia-Pacific Financial Markets

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21.07.2020 | Original Research

Managerial Ability and External Financing

verfasst von: Min-Rui Choo, Chih-Wei Wang, Chi Yin, Jie-Lun Li

Erschienen in: Asia-Pacific Financial Markets | Ausgabe 2/2021

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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.

Vorheriger Artikel Risk-Sensitive Asset Management with Lognormal Interest Rates

Nächster Artikel Impact of Market Expectations on the U.S. Interest Rate Lift-Off in ASEAN-5 Financial System

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The estimation of Managerial Ability is provided in Appendix 2.

The detailed calculation is as follows: the standard deviation of Managerial Ability is 0.21 (see Table 1), and the coefficient on Managerial Ability in column (6) of Table 4 is − 0.015, so the increase in one-standard-deviation of Managerial Ability cause the reduction of principle amount over total assets by 0.21 × 0.015 = 31.5 basis points. The mean value of PA/Asset is 1000 basis points (Table 1), so the growth rate is 31.5/1,000 = 3.15%.

The detailed calculation is as follows: the standard deviation of Managerial Ability is 0.21 (see Table 1), and the coefficient on Managerial Ability in column (2) of Table 5 is 0.010, so the increase in one-standard-deviation of Managerial Ability cause an increase of equity financing by 0.21 × 0.010 = 21 basis points. The mean value of Equity Financing is 5200 basis points (Table 1), so the percentage increase is 21/5,200 = 0.40%.

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Titel: Managerial Ability and External Financing
verfasst von: Min-Rui Choo
Chih-Wei Wang
Chi Yin
Jie-Lun Li
Publikationsdatum: 21.07.2020
Verlag: Springer Japan
Erschienen in: Asia-Pacific Financial Markets / Ausgabe 2/2021
Print ISSN: 1387-2834
Elektronische ISSN: 1573-6946
DOI: https://doi.org/10.1007/s10690-020-09313-5

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