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Title: The impact of managerial ability on crisis-period corporate investment
Authors: Andreou, Panayiotis 
Karasamani, Isabella 
Louca, Christodoulos 
Ehrlich, Daphna 
Major Field of Science: Social Sciences
Field Category: Economics and Business
Keywords: Firm value;Underinvestment problems;Financing;Corporate investment;Generalist CEOs;Managerial ability
Issue Date: Oct-2017
Source: Journal of Business Research, 2017, vol. 79, pp. 107-122
Volume: 79
Start page: 107
End page: 122
Journal: Journal of Business Research 
Abstract: 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 under investment problems during a crisis which in turn increases firm value.
ISSN: 0148-2963
DOI: 10.1016/j.jbusres.2017.05.022
Rights: © Elsevier
Type: Article
Affiliation : Cyprus University of Technology 
Durham University 
University of Central Lancashire 
Tel Aviv University 
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