92 Research of Organization Capital and Bank Loan Contracts: The Role of Managerial Ability Moreover, organization capital can reflect both the manager's ability and operating quality. On the other hand, managers also play an important role in organization capital investment decision-making. For instance, Lev, Radhakrishnan, and Zhang (2009) point out that managers' compensation can reflect managers' ability, which in turn will stimulate the firm's investment in organization capital. Furthermore, when banks evaluate corporate loan contracting, financial performance is a key evaluation criterion and the manager’s ability is an important factor in the company’s financial investment decision-making efficiency (De Franco, Hope, and Lu, 2017). However, previous studies seldom explore the relationship between organization capital, managerial abilities, and bank loan spreads. This paper focuses on organization capital in intangible assets and explores whether companies' investments in intangible assets will affect bank loan spreads. We further verify how managerial capability affects the relationship between organization capital and bank loan spreads. 2. Literature and Hypotheses Corrado et al. (2009) pointed out that organization capital accounts for approximately 30% of intangible assets, which shows the importance of organization capital in intangible assets and corporate competitive advantages. Past literature on bank lending mention that banks will use the strategy of “information monopoly” while sign loan contracts with borrowers. Banks will provide different lending costs to each company based on different levels of company performances. (Houston and James, 1996; Santos and Winton, 2008; Hale and Santos, 2009; Schenone, 2010). In other words, “information monopoly” is one of the reasons that lending costs varies between companies. On the other hand, Sharpe (1990) and Rajan (1992) both indicate that banks set the interest rate for borrowing by collecting or exchanging information from borrowers. In addition, there is a general consensus that banks will provide more valuable or betterperforming companies with lower lending costs. Based on these preceding studies, we posit that companies investing more organization capital can create better operating performances and corporate value. Banks in turn will provide these better-performing companies with lower lending costs. We thus construct hypothesis 1 as follows.
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