The Impact of Managerial Ability on Crisis-Period Corporate Investment

By Panayiotis Ch. Andreou, Isabella Karasamani, C. Louca, D. Ehrlich. 2017

175 citations recorded by the source corpus.

In this study, we document a strong positive relation between pre-crisis managerial ability and corporate investment during the crisis period, which remains robust in the presence of a large array of control variables capturing corporate governance attributes, executive compensation incentives and CEO characteristics. This relationship was prevalent only among firms with CEOs that had general managerial skills, rather than firm-specific skills. Our results also show that the positive relationship between managerial ability and corporate investment was supported by the capacity of such firms to secure greater financing and be less vulnerable to financial constraints during the crisis. Finally, we find that, on average, the stock market evaluates crisis-period investments positively, yet this effect is evident solely among firms characterized by high pre-crisis managerial ability. Overall, the results are consistent with the view that high managerial ability helps to mitigate underinvestment problems during a crisis which in turn increases firm value.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/290eb0d9991f4c8b4cf7bf2e758bf2f5fa038d06

Citations in the corpus

• Readability of Narrative Disclosures in 10-K Reports: Does Managerial Ability Matter? (2018, unknown): “In Section 2.2 we discuss that firms with more managerial ability are associated with superior financial performance (e.g. Andreou et al., 2017; Bertrand & Schoar, 2003).”
• CEO Duality, Agency Costs, and Internal Capital Allocation Efficiency (2019, unknown): “Second, Andreou et al .”