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This study aims to investigate the relationship between management characteristics including management capability, management entrenchment, agency costs and overconfidence and firm performance in companies listed on the Tehran Stock Exchange market.

The research population includes 125 companies after applying systematic elimination sampling method during 2010-2016. The primary measure for companies’ performance is return on assets and Demerjian et al. (2012a) model is used to measure managerial characteristics.

The results indicated that two management characteristics, namely, management capability and overconfidence are positively associated with firm performance and improve the level of performance. Agency costs did not have any significant effect on firm performance and management entrenchment leads to deterioration in firm performance.

The paper focuses on managerial characteristics and firm performance, which the results may very helpful to companies and investors to hiring managers with specific characteristics. Moreover, the results may give strength to further studies.

The purpose of this paper is to assess the relationship between some management features (management capability, management entrenchment, agency costs and overconfidence) and the innovation of companies listed on the Tehran Stock Exchange.

The study carried out during 2009–2015. A total of 125 companies were selected from eight industries as the sample of study using the method of systematic elimination. A descriptive-correlational design was used in this study and panel data regression models were employed for developing the relationship between research variables.

The obtained results indicated that managerial ability could foster innovation, while managerial entrenchment could stifle innovation and agency costs and overconfidence have no effect on innovation.

The current study is almost the first project which focuses on the management characteristics and firm innovation in developing countries.