Managerial ability and firm value: A new perspective

Nader Atawnah, Arman Eshraghi, Ghasan A. Baghdadi and Ishaq Bhatti

Research in International Business and Finance, 2024, vol. 67, issue PB

Abstract: Using a sample of U.S. firms over three decades, we examine whether the efficiency with which managers generate revenue has an impact on firm value. We find that managerial ability is positively related to firm value such that one standard deviation increase in ability is associated with a 5.7% increase in firm value relative to the mean level. Importantly, by exploiting exogenous CEO turnover, we establish causality between managerial ability and firm value. This relation is stronger in the presence of corporate governance mechanisms, such as institutional investors and financial analysts. We also document a reduction in value-destroying practices - such as earnings management - in firms with more efficient managers.

Keywords: Managerial Ability; Firm Value; Corporate Governance; CEO Turnover (search for similar items in EconPapers)
JEL-codes: G30 G32 M12 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:67:y:2024:i:pb:s0275531923002593

DOI: 10.1016/j.ribaf.2023.102133

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