Does managerial ability increase or decrease firm value?

ABSTRACT

Recent studies have revealed the bright side and dark side of managerial ability, while its effect on firm value remains unclear. We find that managerial ability is positively associated with firm value, and the association is positively (negatively) moderated by ownership concentration (firm size and board independence). Moreover, the positive effect of managerial ability on firm value is greater with increased economic policy uncertainty. Overall, our findings highlight the importance of superior managers in enhancing firm value, especially in challenging environment.

KEYWORDS:

• Firm value
• managerial ability
• corporate governance
• economic policy uncertainty

JEL CLASSIFICATION:

• G32
• G34
• M41

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

This project was funded by the China Postdoctoral Science Foundation [grant number: 2019M660469], the Fundamental Research Funds for the Central Universities [grant numbers: FRF-TP-19-060A1, FRF-BR-20-04B], and the National Natural Science Foundation of China [grant number: 72073009].