توانایی مدیریتی و فرصت سرمایه گذاری شرکت
Abstract
1- Introduction
2- Literature review and hypotheses' development
3- Research design
4- Empirical results
5- Conclusion
Acknowledgements
Appendix A
Appendix B
Appendix C
References
Abstract
This study examines whether firms operated by superior managers can obtain more favorable investment opportunities using data on U.S. industrial firms during 1988–2015. The empirical results disclose that there exists a positive relationship between managerial ability and investment opportunity, and that the relation is only significant in financially unconstrained firms or firms in a strong financial position. Overall, our findings support that firms having managers with superior ability could gain more economic profits via better investment opportunity. Through our research, policy makers and investors can pay more attention on managerial ability.
Introduction
Managerial ability has been proven to play an important determinant in tax avoidance, earnings quality, goodwill impairment, and other corporate policies. However, the relationship between investment opportunity and managerial ability has remained unclear for a long time, likely due to difficulty in measurement and other data limitations. This study focuses on how superior managerial ability affects investment opportunity for the following two reasons. First, as a crucial role in corporate finance, investment opportunity impacts a firm's capital structure, dividend policy, and future growth (Smith and Watts (1992), Kallapur and Trombley (1999)). Second, because investment opportunity is unobservable by outsiders, it would be helpful if we could link investment opportunity to other firm characteristics and managerial ability. We argue that superior managers can understand industrial trends better, predict product demand more accurately, and invest in more value-creating projects, therefore associating themselves with better investment opportunity. Although the hypothesis we propose is somehow intuitive, a recent study in behavior corporate finance also shows that managers with a good reputation and compensation package may engage in more risk-averse and time preference projects that can harm investment opportunities (Graham, Campbell, and Manju (2013)). Moreover, we aim to find out whether the relation between managerial ability and investment opportunity varies under different financial conditions and economic environments. Rather than extrapolate the ability from managers' characteristics, education background, personality traits, and working experience, we examine the relation by adopting the newly developed measure of managerial ability introduced by Demerjian, Lev, and McVay (2012) - namely, the MAscore (henceforth, we use MA-score to represent managerial ability). This measure follows a two-step procedure composed of data envelopment analysis and multivariate regression to quantify managers' efficiency in generating revenue. Prior research shows that the MA-score can reflect management-specific factors more precisely through several valid tests and is thus a better measure of managerial ability.