Managerial talent and managerial practices: Are they complements?

Audinga Baltrunaite, Giulia Bovini and Sauro Mocetti

Journal of Corporate Finance, 2023, vol. 79, issue C

Abstract: We examine the role of managerial talent and its interaction with managerial practices in determining firm performance. We build a matched firm-director panel dataset for the universe of limited liability companies in Italy, tracking directors across different firms over time. We define managerial talent as the individual contribution to the variation of the firms’ total factor productivity, estimated using a two-way fixed effects model. Combining the data with survey information on a representative sample of firms, we then document that our measure of talent correlates with ex-ante and ex-post indicators of ability, i.e. managers’ educational attainment and their forecast precision with respect to the firm’s future performance. Most important, we leverage information on the adoption of managerial practices within the firm to examine potential synergies between managerial talent and structured managerial practices, thus bridging two separate strands of the literature. While talent and structured practices are positively associated with firm productivity on their own, there is evidence of complementarities between the two. These findings hold both in a cross-sectional setting and in a panel analysis that accounts for time-invariant firm heterogeneity. Overall, our results indicate that the effectiveness of managerial practices varies with managers’ ability to implement them.

Keywords: Board of directors; Managers; Corporate governance; Productivity; Managerial practices (search for similar items in EconPapers)
JEL-codes: D24 G34 M10 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Managerial talent and managerial practices: are they complements? (2021)
Working Paper: Managerial Talent and Managerial Practices: Are They Complements? (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:79:y:2023:i:c:s0929119922001912

DOI: 10.1016/j.jcorpfin.2022.102348

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