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Article
Publication date: 9 March 2021

Wray Bradley and Li Sun

The purpose of this study is to examine the relation between managerial ability and fair value inputs (measured as fair value intensity) for nonfinancial firms.

Abstract

Purpose

The purpose of this study is to examine the relation between managerial ability and fair value inputs (measured as fair value intensity) for nonfinancial firms.

Design/methodology/approach

This study uses regression analysis to investigate the impact of managerial ability on the level of fair value inputs.

Findings

This study finds significant and positive relations between managerial ability and use of Level 1 and Level 2 fair value inputs. On the other hand, this study finds an insignificant relation between managerial ability and Level 3 inputs.

Originality/value

The findings contribute to two research streams. To the best of the author’s knowledge, this is perhaps the first study that directly examines the link between managerial ability and fair value inputs.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

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Article
Publication date: 24 February 2021

Alex Johanes Simamora

The purpose of this paper is to examine the effect of founding-family firms on managerial ability.

Abstract

Purpose

The purpose of this paper is to examine the effect of founding-family firms on managerial ability.

Design/methodology/approach

Founding-family firms are determined by founder and/or family involvement as block holder and as in the firm board. Managerial ability is estimated by data envelopment analysis. Research samples consist of 412 manufacturing firm-years listed in the Indonesian Stock Exchange. Analysis data use random-effect regression as the main analysis and Huber-White regression as an alternative analysis.

Findings

This research finds that founding-family firms have a negative effect on managerial ability. Further, the result shows that lower managerial ability occurred when founding-family firms led by founder and professional CEOs, when other family members involved in the ownership and the board have higher family ownership. It indicates that founding-family firms concern more about family interest, such as family reputation, rather than business needs and best management practice.

Research limitations/implications

Limitation of this research does not occur if the founding-family firms are managed by first, second, third, etc., family generation. Future research expected to consider family generation in founding-family firms management.

Practical implications

This research can be used by founding-family firms in Indonesia as consideration of management policy formulation that can improve managerial ability.

Originality/value

This research provides new evidence if founding-family firms promote lower managerial ability in emerging market such Indonesian market where family businesses are the root of private businesses which have a major contribution to economics.

Details

International Journal of Productivity and Performance Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1741-0401

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Book part
Publication date: 28 September 2020

Dipankar Ghosh, Xuerong (Sharon) Huang and Li Sun

Purpose – This study examines how managerial ability relates to employee productivity using a broad and generalized sample of US firms.Methodology – This study employs a…

Abstract

Purpose – This study examines how managerial ability relates to employee productivity using a broad and generalized sample of US firms.

Methodology – This study employs a generalized sample of firm-years from all industries between 1980 and 2013.

Findings – By contending that managers differ in their ability to synchronize management processes and human capital in ways that enhance employee productivity, the authors provide evidence showing that more-able managers are associated with higher employee productivity. In addition, the authors find that high-ability managers moderate the negative relation between uncertain environments (high-technology firms) and employee productivity. Furthermore, the authors decompose employee productivity into employee efficiency components and employee cost components. The authors find a significant positive association between managerial ability and the employee efficiency component, but do not see a significant association between managerial ability and the employee cost component.

Value – The results contribute to the understanding of employee productivity by showing the relation between managerial ability and employee productivity.

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Article
Publication date: 28 October 2019

Jason Chen and Jennifer Chen

The purpose of this paper is to determine whether managerial ability affects the quality of corporate environmental financial disclosures.

Abstract

Purpose

The purpose of this paper is to determine whether managerial ability affects the quality of corporate environmental financial disclosures.

Design/methodology/approach

Regression analysis is used to examine the association between managerial ability and the quality of corporate environmental financial disclosures.

Findings

The results of primary empirical tests find a negative association between projection errors of corporate environmental capital expenditures and managerial ability. Overall results suggest that (1) managers appear to be equally capable of making relatively accurate projections of total corporate capital expenditures, and (2) managers with higher managerial ability are capable of estimating the projection amounts that appear to be significant, yet do not deviate substantially to what they intend to spend in the subsequent year(s) for legitimation purposes.

Research limitations/implications

The data collected and analyzed include only publicly traded companies in the environmentally sensitive industries in the USA; therefore, the results should not be generalized to non-US listed, private and non-publicly traded businesses.

Practical implications

Results of this study provide practical implications for stakeholders in their decision-making. For instance, understanding how different levels of managerial ability affect corporate environmental disclosures quality assists the board of directors in their evaluations of the performance of current top management. Furthermore, when contemplating new laws, governmental agencies and legislators can consider how managerial ability might affect the likelihood of environmentally sensitive businesses to comply with full disclosure and other reporting requirements.

Social implications

Information regarding top management’s ability to carry out socially acceptable environmental practices is very valuable for investors who are interested in socially responsible and green investing.

Originality/value

This study contributes to and links between two research streams: managerial ability in management literature and environmental financial disclosure literature. This is the first study that empirically tests whether the managerial ability is a determinant of the quality of corporate environmental financial disclosures.

Details

Sustainability Accounting, Management and Policy Journal, vol. 11 no. 6
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 3 July 2017

Li Sun

This study aims to examine the impact of managerial ability on the total amount of chemical releases reported to the Toxics Release Inventory (TRI) at the US Environmental…

Abstract

Purpose

This study aims to examine the impact of managerial ability on the total amount of chemical releases reported to the Toxics Release Inventory (TRI) at the US Environmental Protection Agency.

Design/methodology/approach

Regression analysis is used to examine the association between managerial ability and chemical releases.

Findings

A negative relationship was found between managerial ability and TRI’s chemical releases, suggesting that more-able managers better reduce TRI’s chemical releases, relative to less-able managers.

Practical implications

By providing useful insights into what determines TRI’s chemical releases, this study should interest policy makers and practitioners.

Originality/value

This study contributes to and links two research schools: managerial ability in management literature and corporate social responsibility (i.e. pollution prevention) in the broad business literature. To the best of the author’s knowledge, this is the first empirical study that performs a direct test of the association between managerial ability and TRI’s toxic chemical releases.

Details

Sustainability Accounting, Management and Policy Journal, vol. 8 no. 3
Type: Research Article
ISSN: 2040-8021

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Article
Publication date: 30 July 2019

Mahdi Salehi, Mahmoud Mousavi Shiri and Seyedeh Zahra Hossini

The purpose of this paper is to emphasize the relationship between managerial ability, earnings management, internal control quality and audit fees to establish whether or…

Abstract

Purpose

The purpose of this paper is to emphasize the relationship between managerial ability, earnings management, internal control quality and audit fees to establish whether or not there is a significant relationship between the variables of managerial ability, earnings management, internal control quality and the audit fees.

Design/methodology/approach

The study sample includes 190 listed companies on the Tehran Stock Exchange during 2009–2016. Research hypotheses were tested using the statistical methods of multivariable linear regression and data envelopment analysis pattern.

Findings

The obtained results indicate that there is a significant and direct relationship between managerial ability and internal control quality as well as real earnings management and internal control quality. Based on the results obtained from the second hypothesis, the authors could claim that there is an inverse and significant relationship managerial ability and audit fees. The third hypothesis also revealed that in companies with lower audit fees, there is a stronger relationship between managerial ability and internal control quality. The results of related tests show no significant relationship between accrual-based earnings management and internal control quality.

Originality/value

This paper is the first study in Iran whose main focus is on the relationship between managerial ability, earnings management, internal control quality and audit fees.

Details

International Journal of Productivity and Performance Management, vol. 69 no. 4
Type: Research Article
ISSN: 1741-0401

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Book part
Publication date: 16 July 2019

Christopher Skousen, Li Sun and Kean Wu

Prior research suggests that managers engage in classification shifting using discontinued operations as an earnings management tool. The authors investigate the role of…

Abstract

Prior research suggests that managers engage in classification shifting using discontinued operations as an earnings management tool. The authors investigate the role of managerial ability in this type of classification shifting because prior research links high ability managers to reduced levels of earnings management. Using a large sample from 1988 to 2014, the authors find that more-able managers better mitigate the extent of classification shifting using discontinued operations. The authors also find that our results are mainly driven by firms with income-decreasing discontinued operations.

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Book part
Publication date: 28 May 2019

Li Sun

The purpose of this study is twofold. First, the author posits and finds a significant positive relation between environmental performance (i.e., environmental efficiency…

Abstract

The purpose of this study is twofold. First, the author posits and finds a significant positive relation between environmental performance (i.e., environmental efficiency) and firm performance (i.e., firm efficiency) by using a large panel sample from 1987 to 2015. The results are consistent with the notion in prior research (e.g., Porter, 1991; Porter & van der Linde, 1995) that pollution indicates a form of resource inefficiency and reducing pollution can increase firm performance. Second, managerial ability has recently received tremendous research attention. The author investigates the impact of managerial ability on the relation between environmental efficiency and firm efficiency and finds that the results are mainly driven by firms with low managerial ability.

Details

Beyond Perceptions, Crafting Meaning
Type: Book
ISBN: 978-1-78973-224-5

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Article
Publication date: 11 November 2014

Anat BarNir

The purpose of this paper is to explore direct and indirect effects of pre-venture managerial experience (PVME) on new venture innovation. Using opportunity-costs…

Abstract

Purpose

The purpose of this paper is to explore direct and indirect effects of pre-venture managerial experience (PVME) on new venture innovation. Using opportunity-costs framework, the following questions are explored: does the entrepreneur's PVME directly affect the extent of innovation in the new venture? What is the role of expectation for high returns in the relationship between PVME and innovation? What is the role of expectation for high returns in the relationship between PVME and innovation? Is there a relationship between abilities and expectancies and does it affect innovation?

Design/methodology/approach

Data were obtained from the Panel Study of Entrepreneurial Dynamics II, which is a national database of individuals in various stages of starting a business. Overall sample consisted of 982 nascent entrepreneurs. Statistical methods explored a multiple serial mediation model using OLS regressions supplemented by analyses based on bootstrapping for assessment of indirect effects.

Findings

PVME effect on innovation is associated with abilities and financial motives, supporting a partial serial multiple mediation model in which PVME affects innovation indirectly through abilities and where abilities affect innovation directly as well as indirectly through expectations. Results also suggest a suppression effect and a possible negative effect of PVME.

Originality/value

Abilities facilitate innovation, which has implications for policy makers who aim to enhance innovations, for investors in assessing potential of innovations, and for entrepreneurs who aim at improving innovation. Shedding light on the mechanism by which prior experience affects innovation, including the role of financial expectations and how abilities possibly negate negative effects associated with experience improve the understanding of and ability to enhance innovation and improve new venture competitive stand.

Details

Management Decision, vol. 52 no. 10
Type: Research Article
ISSN: 0025-1747

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Article
Publication date: 1 December 2020

Mukesh Garg, Mehdi Khedmati, Fanjie Meng and Prabanga Thoradeniya

The purpose of this paper is to examine whether the quality of management can mitigate the positive association between corporate tax avoidance and firm-specific stock…

Abstract

Purpose

The purpose of this paper is to examine whether the quality of management can mitigate the positive association between corporate tax avoidance and firm-specific stock price crash risk (SPCR).

Design/methodology/approach

The study is based on data from the Center for Research in Security Prices (CRSP), Compustat and ExecuComp and focuses on US-listed firms from 1980 to 2016. The authors employ ordinary least squares (OLS) regression as the baseline methodology and use five measures of tax avoidance and three measures of SPCR. Propensity score matching (PSM) and two-stage least squares methodologies are employed to address endogeneity concerns.

Findings

The authors find that more able managers weaken the positive relationship between tax avoidance and SPCR. The results suggest that the benefits of efficient tax management are more likely in firms with a more able management team as the likelihood of SPCR due to tax avoidance practices is reduced in such firms.

Practical implications

This study has important practical implications for investors who are concerned about firms that engage in tax planning activities that can reduce corporate taxes, but at the same time increase the SPCR. Considering the compelling arguments and the “dark” side of more able managers who may engage in opportunistic behaviour, the study provides useful evidence in support of more able managers.

Originality/value

This paper contributes to the SPCR literature by examining the effect of managerial ability on the likelihood of tax avoidance causing SPCR. Able managers are likely to lower the risk faced by investors and are less likely to extract rent and manipulate information. Therefore, the findings of this study have implications for investors by informing them of the negative value implications of tax avoidance and how they can be mitigated by hiring more able managers.

Details

International Journal of Managerial Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1743-9132

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