Is there a dark side of managerial ability? Evidence from the use of derivatives and firm risk in China

Cheng, Lingsha; Cheung, Adrian

doi:10.1016/j.jcae.2021.100258

Cited by 19 publications

(10 citation statements)

References 76 publications

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“…However, some studies show that high-ability managers have stronger incentives to exercise their discretion for selfinterest (e.g. Baik et al, 2020;Cheng and Cheung, 2021;Doukas and Zhang, 2020), which seems not support our finding. We argue that the self-interest incentives of high-ability managers would be less for firms with better governance structure and such firms can still recognize goodwill impairment in a timely manner.…”

Section: The Role Of Agency Problemscontrasting

confidence: 99%

Managerial ability and goodwill impairment: evidence from China

Huang

Xiong²

2022

IJOEM

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PurposeThis paper aims to examine the effects of managerial ability (MA) on the likelihood and the timeliness of goodwill impairment and explore whether the desirable effect of MA vary with the degree of agency problems.Design/methodology/approachThe authors propose a unified framework to simultaneously examine the effects of MA on the likelihood and the timeliness of goodwill impairment by incorporating a market-based impairment indicator (denoted as BTM), MA and the interaction of BTM with MA to this study’s regression model to account for the likelihood of goodwill impairment. BTM addresses the timeliness of goodwill impairment.FindingsThis study finds that firms with higher MA have lower likelihood of goodwill impairment, and such firms are more likely to recognize goodwill impairment in a timely manner when the underlying value of goodwill is economically impaired. This desirable effect of MA is more pronounced in non-state-owned enterprise (SOEs) and firms without chief executive officer (CEO) duality.Practical implicationsFirms can reduce the losses arising from goodwill impairment by enhancing the ability of their management teams combined with improved corporate governance structure.Originality/valueThis paper provides novel insights on understanding the role of MA in not only reducing the likelihood but also enhancing the timeliness of goodwill impairment. The findings help advance the upper echelons theory by uncovering the heterogenous effects of executives with different levels of ability.

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Section: The Role Of Agency Problemscontrasting

confidence: 99%

Managerial ability and goodwill impairment: evidence from China

Huang

Xiong²

2022

IJOEM

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“…Firm expects managers to be better able to understand technology and industry trends, be reliable in predicting product demand, be able to create higher investment, and be able to manage their employees more efficiently so that ultimately it is expected to increase company share price. Results of this study are in accordance with research conducted by (Cheng & Cheung, 2021), but not in accordance (Gong et al, 2021;La'bi et al, 2018) Results of CSR research on Profitability show that the average company in providing information about CSR activities to consumers is so significant to increase sales that company profitability level will also increase. Information is not only seen from signal context to get return expected by the company.…”

Section: Discussionsupporting

confidence: 66%

The effect of social responsibility and managerial ability on firm value-mediated profitability

Wiranudirja¹,

Salim²,

Indrawati³

2022

IJRBS

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The mining industry in Indonesia has a high enough capitalization value to attract investment. The more investors that invest, the higher the stock price and the value of the firm, yet the mining sector's share price has changed throughout time. The mining industry in Indonesia must likewise be mindful and worried about the environment. Previous research has not explored the correlation between profitability and firm value, which contributes as a mediator. This resulted in a clear gap in the literature. This study contributes to filling a gap in the literature. The mining sector businesses listed on the Indonesia Stock Exchange (IDX) from 2018 to 2020 were chosen as the population, with a total sample of 11 companies selected using the purposive selection approach. The data analysis process has been carried out using SPSS version 28 software. The study's findings revealed that corporate social responsibility and corporate management skills had little influence on business value. Furthermore, the findings of this research show that profitability, as a moderating variable in this study, is a complete mediator of social responsibility and managerial ability to firm value. The presence of profitability mediation in this research yields substantial findings, serving as a warning to investors.

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Section: Limitations and Future Research Directionsmentioning

confidence: 99%

“…Nevertheless, we also acknowledge that more abled managers could make high risk decisions that may lower the operating efficiency or reduce the firm value or growth (e.g. Cheng and Cheung, 2021;Malmendier et al, 2007;Petrou and Procopiou, 2016). Thus, the broader definition of efficiency with the consideration of direct impact of managerial ability would be interestingly investigated.…”

Section: Limitations and Future Research Directionsmentioning

confidence: 99%

Mathematical modeling of optimal allocation of remote workforce: an interdisciplinary investigation with Hofstede's cultural factors and managerial ability

Sun

Kim

Zhao

2022

CCSM

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PurposeAs the pandemic begins to ease, many companies are figuring out that working remotely is the future of work and “a new normal”. This research focuses on strategic planning and practices inherent in remote work, and aims to identify the optimal balance between virtual and on-site working. Specifically, the authors investigate the moderating effects of managerial ability and Hofstede's cultural factors.Design/methodology/approachThe authors build a mathematical model to locate the optimal balance between virtual and on-site working. A numerical study is presented, and additional sensitivity analysis is conducted to validate the proposed model.FindingsThis model provides organizations with a general guideline with recommended optimal percentages of remote workforce based on specific Hofstede's national scores. The authors also find that organizations with varying levels of managerial ability exhibit different adoption rates of remote working.Research limitations/implicationsBecause of the chosen research approach, the proposed model may lack empirical verification and require further adjustment of parameters. Therefore, researchers are encouraged to empirically and statistically test the proposed model further.Practical implicationsThis model equips organizations and practitioners with a general guideline to identify their desired portion of remote workforce. The incorporation of managerial ability and cultural factors makes our model applicable to various business structures across different sectors.Originality/valueThis proposed model addresses this optimization problem from a mathematical perspective with an interdisciplinary approach. The model also considers the moderating effects of managerial ability and Hofstede's cultural factors.HighlightsThe main contribution of this study is the theoretical development of our mathematical model that identifies the optimal balance between remote and on-site workforce in the context of managerial ability and Hofstede's cultural factors.A numerical study is presented, and additional sensitivity analysis is conducted to validate the proposed model and highlight the moderating effect of managerial ability and cultural influence on the adopted percentages of remote working.Our study suggests that organizational capabilities, managerial skills, and culturally suitable work arrangement are vital in successful development and implementation of remote working policy.Practical managerial implications and general guidelines are offered to organizations and practitioners.

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Is there a dark side of managerial ability? Evidence from the use of derivatives and firm risk in China

Cited by 19 publications

References 76 publications

Managerial ability and goodwill impairment: evidence from China

Managerial ability and goodwill impairment: evidence from China

The effect of social responsibility and managerial ability on firm value-mediated profitability

Mathematical modeling of optimal allocation of remote workforce: an interdisciplinary investigation with Hofstede's cultural factors and managerial ability

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