IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v28y2023i4d10.1007_s11142-022-09699-9.html
   My bibliography  Save this article

Credit risk assessment and executives’ legal expertise

Author

Listed:
  • Mia Hang Pham

    (Massey University)

  • Yulia Merkoulova

    (Monash University)

  • Chris Veld

    (Monash University)

Abstract

We study whether firms that are led by chief executive officers (CEOs) with law degrees (lawyer CEOs) have different credit ratings and costs of debt from other firms. Our sample consists of Standard & Poor’s 1500 firms from 1992 to 2020, 9.2% of which have lawyer CEOs. We find that these firms have better credit ratings, compared to other firms. On average, their cost of debt is 10% lower than that of firms led by CEOs without legal backgrounds. Our results are robust to different specifications, sampling methods, and controls, such as firm and CEO characteristics. We identify two ways that CEO expertise translates into higher credit ratings: lawyer CEOs are associated with a lower future volatility of stock returns and a reduction in information risk. The decreased business risk and better financial reporting are associated with 5% lower auditing fees for firms with lawyer CEOs.

Suggested Citation

  • Mia Hang Pham & Yulia Merkoulova & Chris Veld, 2023. "Credit risk assessment and executives’ legal expertise," Review of Accounting Studies, Springer, vol. 28(4), pages 2361-2400, December.
    • Handle: RePEc:spr:reaccs:v:28:y:2023:i:4:d:10.1007_s11142-022-09699-9
    DOI: 10.1007/s11142-022-09699-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11142-022-09699-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11142-022-09699-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Credit ratings; CEOs; Legal education; Cost of capital; Audit pricing;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:reaccs:v:28:y:2023:i:4:d:10.1007_s11142-022-09699-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.