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http://hdl.handle.net/10397/94399
Title: | No-fly zone in the loan office : how chief executive officers’ risky hobbies affect credit stakeholders’ evaluation of firms | Authors: | Ouyang, B Tang, Y Wang, C Zhou, J |
Issue Date: | Jan-2022 | Source: | Organization science, Jan. - Feb. 2022, v. 33, no. 1, p. 414-430 | Abstract: | The extant research has often examined the work-related experiences of corporate executives, but their off-the-job activities could be just as insightful. This study employs a novel proxy for the risky hobbies of chief executive officers (CEOs)-CEOs' hobby of piloting a private aircraft-and investigates its effect on credit stakeholders' evaluation of the firms led by the CEOs as reflected in bank loan contracting. Using a longitudinal data set on CEOs of large United States-listed firms across multiple industries between 1993 and 2010, we obtain strong evidence that bank loans to firms steered by CEOs who fly private jets as a hobby tend to incur a higher cost of debt, to be secured, to have more covenants, and to be syndicated. These effects are mainly driven by banks, which perceive such firms as having a higher default risk. These relationships become stronger when the CEO is more important to the firm and/or can exercise stronger control over decision making. Supplemented by field interviews, our results are also robust to various endogeneity checks using different experimental designs, the Heckman two-stage model, a propensity score-matching approach, a difference-in-differences test, and the impact threshold of confounding variables. | Keywords: | Pilot CEO Risky hobby Off-the-job activities Stakeholder theory Upper echelons theory |
Publisher: | Institute for Operations Research and the Management Sciences | Journal: | Organization science | ISSN: | 1047-7039 | EISSN: | 1526-5455 | DOI: | 10.1287/ORSC.2021.1443 | Rights: | Copyright:© 2021 INFORMS This is the accepted manuscript of the following article: Ouyang, B., Tang, Y., Wang, C., & Zhou, J. (2022). No-fly zone in the loan office: How chief executive officers’ risky hobbies affect credit stakeholders’ evaluation of firms. Organization Science, 33(1), 414-430, which has been published in final form at https://doi.org/10.1287/orsc.2021.1443 |
Appears in Collections: | Journal/Magazine Article |
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Ouyang_No-Fly_Zone_Loan.pdf | Pre-Published version | 522.75 kB | Adobe PDF | View/Open |
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