A statistical foundation for the measurement of managerial ability

Rajiv Banker, Han-Up Park and Biresh Sahoo

MPRA Paper from University Library of Munich, Germany

Abstract: Demerjian, Lev, and McVay (2012) (DLM) provide a conceptual framework for the measurement of managerial ability using data envelopment analysis (DEA). We show that the DLM method provides a consistent estimator of managerial ability. The DLM approach to measuring managerial ability begins with the first stage estimation of firm efficiency in transforming inputs into outputs. The second stage removes the impact of contextual variables on the firm efficiency so that the residuals measure the impact of unobserved managerial ability. We leverage the properties of the DEA estimator (Banker and Natarajan 2008) to show that the DLM approach provides a statistically consistent estimator of the managerial ability’s impact on firm efficiency.

Keywords: DEA; Efficiency; Managerial Ability; Simulation (search for similar items in EconPapers)
JEL-codes: C63 C67 D24 (search for similar items in EconPapers)
Date: 2022-01-08
New Economics Papers: this item is included in nep-ecm, nep-eff and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:111832

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