The effect of CEO power on bond ratings and yields

Journal of Empirical Finance

Volumn 17, Issue 4, 2010, Pages 744-762

  Liu, Yixin ^a   Jiraporn, Pornsit ^b,c  

^a UNIVERSITY OF NEW HAMPSHIRE   (United States)

^b PENNSYLVANIA STATE UNIVERSITY   (United States)

^c THAMMASAT UNIVERSITY   (Thailand)

Author keywords

Agency theory; Bondholders; CEO power; Cost of bond financing

Indexed keywords

EID: 77954457099     PISSN: 09275398     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jempfin.2010.03.003     Document Type: Article

References (76)

1. Abdel-khalik A.R. An empirical analysis of CEO risk aversion and the propensity to smooth earnings volatility. J. Acc. Audit. Finance 2007, 22(2):201-235.
2. Aboody David, Lev Baruch Information asymmetry, R&D, and insider gains. J. Finance 2000, 55:2747-2766.
3. Adams J. CEO Turnover and the Agency Cost of Debt, Working Paper 2005.
4. Adams R., Almeida H., Ferreira D. Powerful CEOs and their impact on corporate performance. Rev. Finan. Stud. 2005, 18:1403-1432.
5. Agrawal A., Knoeber C. Do some outside directors play a political role?. J. Law Econ. 2001, 44:179-198.
6. Anderson R., Mansi S., Reeb D. Board characteristics, accounting reporting integrity, and the cost of debt. J. Acc. Econ. 2004, 37:315-342.
7. Ashbaugh-Skaife H., Collins D., LaFond R. The effects of corporate governance on firms' credit ratings. J. Acc. Econ. 2006, 42:203-243.
8. Bebchuk L., Cohen A., Ferrell A. What matters in corporate governance?. Rev. Finan. Stud. 2009, 22:783-827.
9. Bebchuk L., Cremers M., Peyer U. Pay Distribution in the Top Executive Team 2009, Harvard University, Working paper.
10. Bertrand M., Schoar A. Managing with style: the effects of managers on firm policies. Q. J. Econ. 2003, 118:1169-1208.
11. Bhojraj S., Sengupta P. Effect of corporate governance on bond ratings and yields: the role of institutional investors and outside directors. J. Bus. 2003, 76:455-475.
12. Bhojraj S., Swaminathan B. How Does the Corporate Bond Market Value Capital Investments and Accruals, Working Paper 2003.
13. Billett M.T., Liu Y. Shareholder-Manager Alignment and the Cost of Debt, Working Paper 2007.
14. Brass D.J. Being in the right place: a structural analysis of individual influence in an organization. Adm. Sci. Q. 1984, 29:518-539.
15. Child J. Organizational structure, environments and performance: the role of strategic choice. Sociology 1972, 6:1-22.
16. Core J., Holthausen R., Larcker D. Corporate governance, chief executive officer compensation, and firm performance. J. Finan. Econ. 1999, 51:371-406.
17. Cremers M., Nair V., Wei C. Governance mechanisms and bond prices. Rev. Finan. Stud. 2007, 20:1359-1388.
18. Davidson W.N., Jiraporn P., Kim Y.S., Nemec C. Earnings management following duality-creating successions: ethnostatistics, impression management, and agency theory. Acad. Manage. 2004, 47:267-275.
19. Demsetz Harold, Lehn Kenneth The structure of corporate ownership- causes and consequences. J. Polit. Econ. 1985, 93(6):1155-1177.
20. Denis D., Denis D. Performance changes following top management dismissals. J. Finance 1995, 50:1029-1057.
21. Duru A., Mansi S., Reeb D. Earnings-based bonus plans and the agency costs of debt. J. Acc. Public Policy 2005, 24:431.
22. Fahlenbrach R. Founder-CEOs, investment decisions and stock market performance. J. Finan. Quant. Anal. 2009, 44:439-466.
23. Fama E. Agency problems and the theory of the firm. J. Polit. Econ. 1980, 88:288-307.
24. Finkelstein S. Power in top management teams: dimensions, measurement, and validation. Acad. Manage. J. 1992, 35(3):505-538.
25. Finkelstein S., Hambrick D.C. Top Executives and Their Effects on Organizations 1996, West Publishing Company.
26. Flannery Mark J., Kwan Simon H., Nimalendran M. Market evidence on the opaqueness of banking firms' assets. J. Finan. Econ. 2004, 71:419-460.
27. Francis B.B., Hansan I., John K., Waisman M. The effect of state antitakeover laws on the firm's bondholders. J. Finan. Econ. 2010, 96:127-154.
28. Garfinkel Jon A., Nimalendran M. Market structure and trader anonymity: an analysis of insider trading. J. Finan. Quant. Anal. 2003, 38:591-610.
29. Grinstein Y., Hribar P. CEO compensation and incentives: evidence from M&A bonuses. J. Finan. Econ. 2004, 73:119-144.
30. Hambrick D.C. Environment, strategy, and power within top management teams. Adm. Sci. Q. 1981, 26:252-275.
31. Hambrick D.C., Mason P. Upper echelons: the organization as a reflection of its top managers. Acad. Manage. Rev. 1984, 9:193-206.
32. Hannan M., Freeman J. The population ecology of organizations. Am. J. Sociol. 1977, 82:929-964.
33. Harrison J.R., Torres D.L., Kukalis S. The changing of the guard: turnover and structural change in the top management positions. Adm. Sci. Q. 1988, 33:211-232.
34. Hermalin H., Weisbach M. The determinants of board composition. RAND J. Econ. 1988, 19:589-606.
35. Hinings C.R., Hickson D.J., Pennings J.M. Structural Conditions of interorganizational power. Adm. Sci. Q. 1974, 19(1):22-44.
36. Holdernewss C.G., Sheelan D.P. The role of majority shareholders in publicly held corporations. J. Finan. Econ. 1988, 20:317-346.
37. Huson M., Malatesta P., Parrino R. Managerial succession and firm performance. J. Finan. Econ. 2004, 74:237-275.
38. Jiang J. Beating earnings benchmarks and the cost of debt. Acc. Rev. 2008, 83:377-416.
39. John K., Kadyrzhanova Peer Effects in Corporate Governance, Working Paper 2008, New York University.
40. John, K. and Knyazeva, A., 2006, Payout policy, agency conflict, and corporate governance, Working paper, University of Rochester and New York University.
41. Klock M., Mansi S., Maxwell W. Does corporate governance matter to bondholders?. J. Finan. Quant. Anal. 2005, 40:693-719.
42. Knyazeva D. Analysts and Journalists: Firm Policies and Governance Design, Working Paper 2009, University of Rochester.
43. Kyle Albert Continuous auctions and insider trading. Econometrica 1985, 53:1315-1335.
44. Lamy R., Thompson R. Risk premia and the pricing of primary issue bonds. J. Bank. Finance 1988, 12:585-601.
45. Lieberson S., O'Connor J.F. Leadership and organizational performance: a study of large corporation. Am. Sociol. Rev. 1972, 37:117-130.
46. Litov L.P. Corporate Governance and Financing Policy: New Evidence, Working Paper 2005.
47. Liu, Y., Y. Ning and D. Davidson, 2009, Earnings management surrounding new debt issues, Finan. Rev., forthcoming.
48. Malmendier U., Tate J.A. Superstar CEOs, Working Paper 2008.
49. Mansi S., Maxwell W., Miller D.P. Information Risk and the Cost of Debt Capital, SSRN Working Paper 2006.
50. Mansi S., Maxwell W., Wald J. Creditor protection laws and the cost of debt. J. Law Econ. 2009, 52:701-726.
51. Masulis R. Corporate investment and dividend decisions under differential personal taxation. J. Finan. Quant. Anal. 1988, 23:369-385.
52. Morck R., Shleifer A., Vishny R. Alternative mechanisms for corporate control. Am. Econ. Rev. 1989, 7:842-853.
53. Moreman R.W. The Impact of Information Asymmetry on Debt Pricing and Maturity, Working Paper 2009, University of Chicago.
54. Ortiz-Molina H. Top-management incentives and the pricing of corporate public debt. J. Finan. Quant. Anal. 2006, 41:317-340.
55. Parrino R. CEO turnover and the outside succession: a cross-sectional analysis. J. Finan. Econ. 1997, 46:165-197.
56. Pathan S. Strong boards, CEO power and bank risk-taking. J. Bank. Finance 2009, 33:1340-1350.
57. Perrow C. Departmental power in industry. Power in Organizations 1970, 59-89. Vanderbilt University Press, Nashville. M. Zald (Ed.).
58. Pfeffer J. Power in Organization 1981, Pitman, Marshfield, MA.
59. Pfeffer J. New Directions for Organization Theory: Problems and Prospects 1997, Oxford University Press, New York.
60. Pfeffer J., Moore W.L. Power in university budgeting: a replication and extension. Adm. Sci. Q. 1980, 25:637.
61. Pfeffer J., Salancik G.R. Organizational decision-making as a political process- the case of a university budget. Adm. Sci. Q. 1974, 19:135.
62. Provan K. Recognizing, measuring, and interpreting the potential/enacted power distinction in organizational research. Acad. Manage. Rev. 1980, 5:549-559.
63. Qi Y., Roth L., Wald J.K. Political rights and the cost of debt. J. Finan. Econ. 2010, 95:202-226.
64. Rotemberg Julio J., Saloner Garth Visionaries, managers, and strategic direction. RAND J. Econ. 2000, XXXI:693-716.
65. Sah R.K., Stiglitz J. The architecture of economic systems: hierarchies and polyarchies. Am. Econ. Rev. 1986, 76:716-727.
66. Sah R.K., Stiglitz J. The quality of managers in centralized versus decentralized organizations. Quart. J. Econ. 1991, 106:289-295.
67. Salancik G.R., Pfeffer J. The bases and use of power in organizational decision-making: the case of the university. Adm. Sci. Q. 1974, 19:453.
68. Sargan J.D. The estimation of economic relationships using instrumental variables. Econometrica 1958, 26:397-415.
69. Sengupta P. Corporate disclosure quality and the cost of debt. Acc. Rev. 1998, 73:459-474.
70. Stoughton Neal M., Talmor Eli Managerial bargaining power in the determination of compensation contracts and corporate investment. Int. Econ. Rev. 1999, 40:69-93.
71. Tushman M., Romanelli E. Organizational evolution: a metamorphosis model of convergence and reorientation. Research in Organizational Behavior 7 1985, JAI Press, Greenwich, CT. L. Cummings, B. Staw (Eds.).
72. Van den Steen Eric Organizational beliefs and managerial vision. J. Law, Econ., Organ. 2005, 21(1):256-283.
73. Villalonga B., Amit R. How do family ownership, control and management affect firm value. J. Finan. Econ. 2006, 80:385-417.
74. Weiner N., Mahoney T. A model of corporate performance as a function of environmental, organizational and leadership influences. Acad. Manage. J. 1981, 24:453-470.
75. Ziebart D., Reiter S. Bond ratings, bond yields and financial information. Contemp. Acc. Res. 1992, 9:252-282.
76. Zhao Mengxin, Lehn Kenneth M., Mandelker Gershon N. Transfer of Control in Mergers: What Happens to the CEOs? 2002, (working paper).