مقاله انگلیسی رایگان در مورد توانایی مدیریتی، کارایی سرمایه گذاری و خطر سقوط قیمت سهام – الزویر 2017

Abstract

We examine empirically the effect of managerial ability on firm-level investment efficiency and how this affects future stock price crash risk. Using a managerial ability measure developed by Demerjian et al. (2012), the paper documents consistent evidence that the more able managers over-invest compared to their not-so-able counterparts, even after controlling for the effects of financial reporting quality and other firm specific determinants of investment efficiency. This evidence is robust to alternative proxies for investment efficiency. The empirical evidence also suggests that crash risk increases for firms with more able managers, primarily through the investment inefficiency channel. Overall, the study contributes to a better understanding of the influence of managerial ability on investment decisions in the context of diverging opinions regarding manager-specific effects on organizational outcomes.

Introduction

We examine empirically the effect of managerial ability on firm-level investment efficiency and how this affects future stock price crash risk. Our study is motivated by the desire for a better assessment of the management’s impact on investment decisions and on stock price crash risk: an outcome of direct economic consequence for investors. According to the optimal investment argument proposed in the neo-classical framework, managers should continue investing until the marginal benefit of capital investment equals marginal costs. This proposition, however, is based on the assumption of no friction in the capital markets, i.e. managers obtain financing for positive net present value projects (NPVs) at the prevailing economy-wide interest rate and return excess cash to investors (e.g., Abel 1983; Hayashi, 1982; Yoshikawa, 1980). However, the agency theory view suggests that managerial self-interest might produce sub-optimal investment decisions resulting in both over- or under-investment. For example, both moral hazard and adverse selection imperfections inherent in the information asymmetry between managers and outside suppliers of capital, can adversely affect investment efficiency.

Managers intending to maximize their personal welfares are sometimes inclined to make investments that are not in the best interests of shareholders (Berle and Means, 1932; Jensen and Meckling, 1976; Jensen, 1986). Since there is divergence of incentives between mangers and investors, models of moral hazard suggest that managers will invest in negative NPVs. Models of adverse selection, on the other hand, suggest that if managers are better informed than investors about a firm’s prospects, they will try to time capital issuances to sell overpriced securities (i.e. a ‘lemons’ problem). If they are successful, they may over-invest these proceeds (e.g., Baker et al., 2003).