94 Research of Organization Capital and Bank Loan Contracts: The Role of Managerial Ability OCi,t = (1 ‒ δ0 ) × OCi,t-1 + SG&Ai,t CPIt , where OCi,t represents the organization capital of the i th company in year t; δ 0 is the depreciation rate of organization capital set to 15%, mainly referring to the estimate of the depreciation rate of R&D capital in 2006 by the Bureau of Economic Analysis (BEA); and CPIt is the US Consumer Price Index in year t. We use the variable of Adjusted Organization Capital (ADJOC), which is calculated by a company’s organization capital minus the median organization capital of the company’s industry, to avoid the influence of industry effects on results. The industry classification is mainly based on Fama and French practices, which divide the company’s industries into 48 categories (Fama and French, 1997). 3.2 Models This research first explores the impact of organization capital on bank lending spreads and establishes a regression model using the ordinary least squares method. The equation to examine hypothesis 1 is as follows: Log (AISD)i,j,t = α + β1ADJOCi,t-1 + β2Firm characterisicsi,t-1 + β3Loan characterisiticsi,j,t + Loan_typei + Loan_purposei + Yeart + Industryi + εi,j,t , where Log (AISD)i,j,t is the natural logarithm of the all-in spread drawn, represented as a dependent variable for bank lending spreads. ADJOC is the ith company’s organization capital in year t-1, which could eliminate endogeneity problems. Following Graham, Li, and Qiu (2008), we control firm characteristics, loan characteristics, loan type dummy variables, and loan purpose dummy variables. We also control Year dummy variables (Year) and Industry dummy variables (Industry) in this model. Furthermore, in hypothesis 2, we take the variable of Managerial Ability (MA) into consideration to examine how it affects the relationship between organization capital and bank lending spreads. Based on the model built in hypothesis 1, we consider the variable of Managerial Ability (MA) into the model of hypothesis 1 to examine the interaction effect between organization capital and managerial ability on bank lending spreads.
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