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The association between corporate general counsel and firm credit risk

Author

Listed:
  • Ham, Charles
  • Koharki, Kevin

Abstract

This paper examines whether bond market participants alter their credit risk assessments of firms that appoint the corporate general counsel (GC) to senior management. GCs may place less emphasis on their gatekeeping responsibilities upon appointment to senior management, thus potentially resulting in increased firm credit risk. Using changes in firm-level credit ratings and credit default swap spreads to proxy for changes in credit risk, we find a positive association between GC promotions to senior management and increases in firm credit risk. Additionally, the increased personal liability for GCs under the Sarbanes–Oxley Act only partially mitigates this association.

Suggested Citation

  • Ham, Charles & Koharki, Kevin, 2016. "The association between corporate general counsel and firm credit risk," Journal of Accounting and Economics, Elsevier, vol. 61(2), pages 274-293.
  • Handle: RePEc:eee:jaecon:v:61:y:2016:i:2:p:274-293
    DOI: 10.1016/j.jacceco.2016.01.001
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    Citations

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    Cited by:

    1. Steven Balsam & So Yean Kwack, 2022. "The impact of connections between the CEO and top executives on appointment, turnover and firm value," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(5-6), pages 882-933, May.
    2. Michael, Michael & Ali, Muhammad Jahangir & Atawnah, Nader & Muniandy, Balachandran, 2022. "Fiduciary or loyalty? Evidence from top management counsel and stock liquidity," Global Finance Journal, Elsevier, vol. 52(C).
    3. Mari Sako & Katsuyuki Kubo, 2018. "Professionals On Corporate Boards In Japan: How Do They Affect The Bottom Line?," Working Papers halshs-01770191, HAL.
    4. Dang, Man & Puwanenthiren, Premkanth & Jones, Edward & Nguyen, Thieu Quang & Vo, Xuan Vinh & Nadarajah, Sivathaasan, 2022. "Strategic archetypes, credit ratings, and cost of debt," Economic Modelling, Elsevier, vol. 114(C).
    5. Yu Zhao & Huaming Du & Qing Li & Fuzhen Zhuang & Ji Liu & Gang Kou, 2022. "A Comprehensive Survey on Enterprise Financial Risk Analysis from Big Data Perspective," Papers 2211.14997, arXiv.org, revised May 2023.
    6. Habib Zaman Khan & Muhammad Nurul Houqe & Ielemia K Ielemia, 2023. "Organic versus cosmetic efforts of the quality of carbon reporting by top New Zealand firms. Does market reward or penalise?," Business Strategy and the Environment, Wiley Blackwell, vol. 32(1), pages 686-703, January.
    7. Pham, Mia Hang, 2020. "In law we trust: Lawyer CEOs and stock liquidity," Journal of Financial Markets, Elsevier, vol. 50(C).
    8. Papadimitri, Panagiota & Pasiouras, Fotios & Tasiou, Menelaos & Ventouri, Alexia, 2020. "The effects of board of directors’ education on firms’ credit ratings," Journal of Business Research, Elsevier, vol. 116(C), pages 294-313.
    9. John Donovan & Jared Jennings & Kevin Koharki & Joshua Lee, 2021. "Measuring credit risk using qualitative disclosure," Review of Accounting Studies, Springer, vol. 26(2), pages 815-863, June.
    10. Osama Wagdi & Yasmeen Tarek, 2022. "The Integration of Big Data and Artificial Neural Networks for Enhancing Credit Risk Scoring in Emerging Markets: Evidence from Egypt," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(2), pages 1-32, February.
    11. Zhao, Sheng & Moreira, Fernando & Wang, Tong, 2021. "Is solicitation status related to rating conservatism and rating quality?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    12. Safiullah, Md & Kabir, Md. Nurul & Miah, Mohammad Dulal, 2021. "Carbon emissions and credit ratings," Energy Economics, Elsevier, vol. 100(C).
    13. SAKO Mari & KUBO Katsuyuki, 2019. "Professionals on Corporate Boards: How do they affect the bottom line?," Discussion papers 19010, Research Institute of Economy, Trade and Industry (RIETI).
    14. Safiullah, Md & Alam, Md Samsul & Islam, Md Shahidul, 2022. "Do all institutional investors care about corporate carbon emissions?," Energy Economics, Elsevier, vol. 115(C).

    More about this item

    Keywords

    Credit risk; Credit rating agency; General counsel;
    All these keywords.

    JEL classification:

    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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