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Valuing talent: Do CEOs' ability and discretion unambiguously increase firm performance

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  • Cheung, Kwok Tong Samuel
  • Naidu, Dharmendra
  • Navissi, Farshid
  • Ranjeeni, Kumari

Abstract

This study investigates how the association between more able managers and firm performance, documented in prior research, is affected by the joint effect of managerial discretion and monitoring quality. We find that higher levels of managerial discretion afford more able managers to further improve firm outcomes only when such discretion is monitored closely to curb more able managers' rent seeking incentives. Our results are robust to a battery of additional and sensitivity analyses that we perform.

Suggested Citation

  • Cheung, Kwok Tong Samuel & Naidu, Dharmendra & Navissi, Farshid & Ranjeeni, Kumari, 2017. "Valuing talent: Do CEOs' ability and discretion unambiguously increase firm performance," Journal of Corporate Finance, Elsevier, vol. 42(C), pages 15-35.
    • Handle: RePEc:eee:corfin:v:42:y:2017:i:c:p:15-35
    DOI: 10.1016/j.jcorpfin.2016.11.006
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    More about this item

    Keywords

    Firm performance; CEO ability; Discretion; Business strategy; Monitoring;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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