The Association Between Corporate General Counsel and Firm Credit Risk

Journal of Accounting and Economics, 61: 274 - 293.

Posted: 9 Jan 2016 Last revised: 11 Mar 2016

See all articles by Charles (Chad) Ham

Charles (Chad) Ham

Washington University in St. Louis - John M. Olin Business School

Kevin Koharki

Purdue University

Date Written: January 2, 2016

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.

Keywords: credit risk; credit rating agency; general counsel

JEL Classification: K00, G24, M40

Suggested Citation

Ham, Charles and Koharki, Kevin, The Association Between Corporate General Counsel and Firm Credit Risk (January 2, 2016). Journal of Accounting and Economics, 61: 274 - 293., Available at SSRN: https://ssrn.com/abstract=2711362

Charles Ham

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

Kevin Koharki (Contact Author)

Purdue University ( email )

610 Purdue Mall
West Lafayette, IN 47907
United States

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