Abstract:
We provide evidence that managerial ability is positively and significantly related to the issuance
method decision of seasoned equity offerings (SEOs) in the U.S. market. Our result is robust after
controlling for various internal and external governance mechanisms, addressing the problem of
endogeneity, and adopting a number of alternative specifications. We further find that the impact
of managerial ability on the SEO issuance choice is stronger for firms with higher information
asymmetry, CEO duality and weaker governance settings. Overall, our study supports the notion
that higher managerial ability is perceived as a positive quality certification on firm information
environments.
