Managerial ability and firm value: A new perspective

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

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

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.

Original languageEnglish
Article number102133
JournalResearch in International Business and Finance
Volume67
DOIs
Publication statusPublished - Jan 2024

Keywords

  • CEO Turnover
  • Corporate Governance
  • Firm Value
  • Managerial Ability

ASJC Scopus subject areas

  • Business, Management and Accounting (miscellaneous)
  • Finance

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