Dare to play with fire? Managerial ability and the use of short-term debt |
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| Institution: | 1. Keck Graduate Institute, Claremont Colleges, 535 Watson Drive, Claremont, CA 91711, United States of America;2. The University of Texas at Dallas, JSOM 14.502, 800 West Campbell Road, Richardson, TX 75080-3021, United States of America;3. Sabanci University, Orta Mahalle Universite Caddesi No: 27, 34956, Tuzla/Istanbul, Turkey;4. University of Memphis, 3675 Central Ave, FAB442, Memphis, TN 38152, United States of America;1. Anderson School of Management, University of New Mexico, Albuquerque, NM 87131, United States of America;2. Department of Finance, National Chengchi University, No.64, Sec.2, ZhiNan Rd., Wenshan District, Taipei City 11605, Taiwan;3. Department of Applied Economics and Management, National Ilan University, No.1, Sec. 1, Shennong Rd., Yilan City, Yilan County 260, Taiwan;1. Huizenga College of Business and Entrepreneurship, Nova Southeastern University, Fort Lauderdale, FL 33314, United States;2. McCallum School of Business, Bentley University, Waltham, MA 02452, United States;1. Department of Banking and Finance, Monash University, W1016, Building 11, Monash University Clayton Campus, VIC 3800, Australia;2. School of Accounting and Finance, Hong Kong Polytechnic University, China;3. Department of Finance, La Trobe University, Martin Building 470, La Trobe University Melbourne Campus, VIC 3086, Australia;4. Finance Area, T.A. PAI Management Institute, P.B. No-9, Manipal, Karnataka 576104, India;1. Department of Accounting and Corporate Governance, Macquarie Business School, Macquarie University, Sydney, Australia;2. The University of Auckland Business School, The University of Auckland, New Zealand |
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| Abstract: | This study documents a positive relation between managerial ability and the use of short-term debt. This finding is robust to various specifications, including a difference-in-difference approach based on CEO turnovers. Able managers' preferences for short-term debt are amplified for firms with greater growth opportunities and are attenuated by firms' refinancing risk. Additional analyses shed light on the implications of high-ability managers' strategic use of short-term debt. Overall, the results presented in this study demonstrate that managers' innate ability plays a critical role in shaping corporate debt maturity structure. |
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