The effects of Board of Directors' education on firms' credit ratings

Papadimitri, Panagiota, Pasiouras, Fotios, Tasiou, Menelaos and Ventouri, Alexia (2020) The effects of Board of Directors' education on firms' credit ratings. Journal of Business Research, 116, 294-313. (doi:10.1016/j.jbusres.2020.04.059).

Record type: Article

Abstract

Using a data set of 1,618 firms from 39 countries, we examine the influence of the educational attainment of a firm’s board of directors on its credit rating. We construct a Leadership Education Index that reflects the educational level of the key members of the board. We document, after controlling for firm and country-specific characteristics, that firms in which the key members of the board have a higher educational level are more likely to receive better credit ratings. To ensure robustness in our results, we conduct a number of analyses and tests designed to alleviate endogeneity and correct for sample bias. Our findings highlight the importance of hiring and retaining well-educated board members that are capable to manage firms and obtain better credit ratings.

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