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.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
