Managerial Ability and Credit Ratings

Cornaggia, Kimberly J.; Krishnan, Gopal V.; Wang, Changjiang

doi:10.1111/1911-3846.12334

Cited by 141 publications

(95 citation statements)

References 93 publications

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“…Our empirical results contribute to a relatively new but growing literature documenting reporting effects of MA-score (Demerjian et al, 2013;Cornaggia, Krishnan, & Wang, 2017). We extend this line of research to include forecasting activity.…”

Section: Resultssupporting

confidence: 52%

Managerial Ability and Forecast Accuracy

Chronopoulos¹,

Siougle²

2017

JMAA

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We examine the relation between managerial ability and management forecast accuracy. We base our analysis on S&P 500 Composite Index constituents for the period of 2006-2012. Data were collected from Thomson Reuteurs, Compustat and Demerjian, Lev, and McVay (2012). We find that forecast accuracy is positively associated with managerial ability in the case of sales forecasts. Specifically, more able managers are associated with lower magnitude's forecast errors in the case of sales forecasts. Additional analysis finds that managerial ability is immaterial to EPS figures' forecast accuracy, i.e., EPS forecasts appear not to be affected by manager's superiority. Regarding sales forecasts, the results are consistent with the assertion that managers impact the quality of the delivered management forecasts. Regarding EPS forecasts, the results are in alignment with Demerjian, Lev, Lewis, and McVay (2013) who highlighted that managerial ability is an ability score related to the entire management team.

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Section: Resultssupporting

confidence: 52%

Managerial Ability and Forecast Accuracy

Chronopoulos¹,

Siougle²

2017

JMAA

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“…An able management reduces default risk by selecting better investment projects and increasing information disclosure, thus reducing borrowing costs from banks (De Franco et al, 2017). As a result, credit rating agencies will also assign such firms a high credit rating (Cornaggia et al, 2017).…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Second, our paper expands the research on managerial ability. Previous studies find that managerial ability affects information quality (Demerjian et al, 2013), tax avoidance (Koester, Shevlin, & Wangerin, 2017), cost of bank loans (De Franco, Hope, & Lu, 2017), and credit rating (Cornaggia, Krishnan, & Wang, 2017). These outcomes, however, are all internal to a firm.…”

Section: Introductionmentioning

confidence: 99%

Do analysts follow firms with able managers?

Gao

Wang

et al. 2020

Manage Decis Econ

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Although previous studies suggest that management quality impacts analyst behavior, there is a dearth in direct empirical evidence that proves this. A sample of listed Chinese firms over the period 2008–2016 proves that a firm with highly skilled managers draws more analysts. We use an instrumental variable approach to mitigate endogeneity issues. Tests show that the positive impact of managerial ability on analyst following is more salient in firms with no political connections and firms located in regions with developed formal institutions. Firms with high‐capability managers help analysts improve their forecast accuracy and lower the dispersion of their opinions.

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“…First, this paper extends the literature on the effects of managerial ability. The existing literature shows that more able managers are associated with better performance (Chang et al, 2010;Demerjian et al, 2012), better earnings quality (Demerjian, Lev, Lewis & McVay, 2013), more tax avoidance (Koester, Shevlin, & Wangerin, 2016), lower credit risks (Cornaggia, Krishnan, & Wang, 2017;Bonsall, Holzman, & Miller, 2016), more intentional earnings smoothing (Demerjian, Lewis-Western, & McVay, 2017), and more accurate management earnings forecast (Baik, Farber, & Lee, 2011). Our study extends this line of research on the influence of managerial ability.…”

Section: Introductionmentioning

confidence: 99%

Managerial Ability and Extreme Investment Behavior

Hsieh¹,

Huang²

2019

AFR

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This paper examines whether, why, and how managerial ability is associated with firms’ investment behavior. Specifically, we focus on the effect of managerial ability on extreme investment behavior. We define expansionary (contractionary) investments as investing significantly more (less) than what is expected based on the firm’s sales growth and industry membership. The baseline results reveal that more able managers are less likely to make contractionary investments, while they are more likely to make expansionary investments. We further propose and test the strategic investment hypothesis, which predicts that more able managers time the product markets and invest aggressively to ensure firms’ future competitiveness. The evidence is supportive of this hypothesis: More able managers are more (less) likely to make expansionary (contractionary) investments when the industry (1) becomes more competitive, and (2) is at the onset of R&D growth. Moreover, expansionary investments by more able managers are indeed their strategic investments, which lead to superior future abnormal returns.

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Managerial Ability and Credit Ratings

Cited by 141 publications

References 93 publications

Managerial Ability and Forecast Accuracy

Managerial Ability and Forecast Accuracy

Do analysts follow firms with able managers?

Managerial Ability and Extreme Investment Behavior

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