DOI
https://doi.org/10.25772/EXNZ-0T59
Defense Date
2015
Document Type
Dissertation
Degree Name
Doctor of Philosophy
Department
Accounting
First Advisor
Myung Seok Park
Second Advisor
Benson Wier
Third Advisor
David Harless
Fourth Advisor
Jean Zhang
Abstract
This study investigates how CEO managerial ability affects investment quality, investment efficiency, and the value of cash. Specifically, I examine whether higher managerial ability is associated with higher M&A quality, more efficient capital investments, and higher value of cash. Investment decision-making and implementation can signal a CEO’s managerial ability (Stein 2003), and shareholders assign more value to the cash of those firms with high ability CEOs. Thus, I predict that more able CEOs conduct higher quality M&A and make more efficient capital investment decisions. I also propose that the value of cash is higher for firms with more able CEOs. Using the methodology developed in Demerjian et al. (2012) to estimate CEO managerial ability, I find that the M&As conducted by more able CEOs are less likely to experience goodwill impairment and divestitures in the post-acquisition period. I also find that managerial ability, to a certain extent, can improve capital investment efficiency when firms have a higher likelihood of over- or under-investment. Furthermore, I provide evidence that cash has higher value if it is managed by more able CEOs. Overall, my findings suggest that while managerial ability plays a limited role in improving M&A quality, it significantly increases capital investment efficiency and the value of cash.
Rights
© The Author
Is Part Of
VCU University Archives
Is Part Of
VCU Theses and Dissertations
Date of Submission
4-16-2015