Managerial ability, financial constraints, and the value of cash holding

Applied Economics Letters

Author

Tsai, J.-F., Mai, N. T., and Bui, D. G.

Published

March 1, 2022

Abstract

We find that a skilful CEO, who persistently performs well over several years, can reduce a firm? financial constraints. Our finding is robust to an instrumental variable regression, different definitions of a skilful CEO, and alternative measures of financial constraints. Further, we provide evidence that skilful managers improve the value of their firms??cash holdings. Thus, this study contributes to the literature by exploring a potential bright side of managerial ability.

Source: Applied Economics Letters