Abstract
This study aims to analyze the trends, progress, and opportunities for future research on managerial ability literature. Since receiving a lot of attention after the study of Demerjian et al. (Manag Sci 58:1229–1248, 2012. http://doi.org/10.1287/mnsc.1110.1487), there has been no literature review study on managerial ability research. Using a systematic review process, this study includes 120 papers. The studies’ period ranged from 1974 to 2020. The findings of this literature review are presented in two parts, namely (1) a discussion of trends in the five classifications (topics, research settings, theories, methods, and primary data analysis techniques) and the current progress in existing studies; and (2) suggestions for future research. We classify suggestions for future research into nine themes: firm performance, capital market, reporting quality, auditing, investment decisions, financial decisions, tax, corporate social responsibility, and others. In addition, the development of managerial ability definition over time is provided prior to the literature review findings.
Similar content being viewed by others
References
Abernathy JL, Kubick TR, Masli A (2018) Evidence on the relation between managerial ability and financial reporting timeliness. Int J Audit 22:185–196. https://doi.org/10.1111/ijau.12112
Akbari F, Salehi M, Vlashani MAB (2018) The effect of managerial ability on tax avoidance by classical and bayesian econometrics in multilevel models: evidence of Iran. Int J Emerg Mark 13:1656–1678. https://doi.org/10.1108/IJoEM-09-2017-0367
Akbari F, Salehi M, Vlashani MAB (2019) The relationship between tax avoidance and firm value with income smoothing: A comparison between classical and Bayesian econometric in multilevel models. Int J Organ Anal 27:125–148. https://doi.org/10.1108/IJOA-09-2017-1235
Andreou PC, Karasamani I, Louca C, Ehrlich D (2017) The impact of managerial ability on crisis-period corporate investment. J Bus Res 79:107–122. https://doi.org/10.1016/j.jbusres.2017.05.022
Andreou PC, Philip D, Robejsek P (2016) Bank liquidity creation and risk-taking: Does managerial ability matter? J Bus Finance Account 43:226–259. https://doi.org/10.1111/jbfa.12169
Arya A, Mittendorf B (2005) Offering stock options to gauge managerial talent. J Account Econ 40:189–210. https://doi.org/10.1016/j.jacceco.2005.02.001
Baik B, Brockman PA, Farber DB, Lee SS (2018) Managerial ability and the quality of firms’ information environment. J Account Audit Finance 33:506–527. https://doi.org/10.1177/0148558X17742820
Baik B, Choi S, Farber DB (2020) Managerial ability and income smoothing. Account Rev 95:1–22. https://doi.org/10.2308/accr-52600
Baik B, Farber DB, Lee SS (2011) CEO Ability and Management Earnings Forecasts. Contemp Account Res 28:1645–1668. https://doi.org/10.1111/j.1911-3846.2011.01091.x
Banna H, Ahmad R, Koh EHY (2018) How does total quality management influence the loan quality of the bank? Total Qual Manag Bus Excell 29:287–300. https://doi.org/10.1080/14783363.2016.1180954
Berk JB, Stanton R (2007) Managerial ability, compensation, and the closed-end fund discount. J Finance 62:529–556. https://doi.org/10.1111/j.1540-6261.2007.01216.x
Berk JB, van Binsbergen JH (2015) Measuring skill in the mutual fund industry. J Financ Econ 118:1–20. https://doi.org/10.1016/j.jfineco.2015.05.002
Berne C, Mugica JM, Rivera P (2005) The managerial ability to control the varied behaviour of regular customers in retailing: interformat differences. J Retail Consum Serv 12:151–164. https://doi.org/10.1016/j.jretconser.2004.05.003
Bertrand M, Schoar A (2003) Managing with style: the effect of managers on firm policies. Q J Econ 118:1169–1208. https://doi.org/10.1162/003355303322552775
Bleaney M, Smith RT (2010) Managerial skill and closed-end fund discounts. Financ Mark Portf Manag 24:441–451. https://doi.org/10.1007/s11408-010-0144-8
Bonsall SB IV, Holzman ER, Miller BP (2017) Managerial ability and credit risk assessment. Manag Sci 63:1425–1449. https://doi.org/10.1287/mnsc.2015.2403
Bose SC, Kiran R, Goyal D (2017) Examining the relation of service assistance facilities, managerial skill competencies and constraints with agri-business incubators performance in India. Custos E Agronegocio 13:75–100
Boyatzis RE, Renio Case A (1989) Research article: The impact of an MBA programme on managerial abilities. J Manag Dev 8:66–77. https://doi.org/10.1108/EUM0000000001363
Burks JJ, Randolph DW, Seida JA (2019) Modeling and interpreting regressions with interactions. J Account Lit 42:61–79. https://doi.org/10.1016/j.acclit.2018.08.001
Cao J, Cheng Y, Golden J, Zhang JH (2019) Managerial ability, forecasting quality, and open-market repurchase program completion. Rev Quant Finance Account 53:871–894. https://doi.org/10.1007/s11156-018-0769-7
Chang YY, Dasgupta S, Hilary G (2010) CEO ability, pay, and firm performance. Manag Sci 56:1633–1652. https://doi.org/10.1287/mnsc.1100.1205
Chauhan GS (2019) Performance attribution of mutual funds in India: outperformance or mis-representation? Account Finance 59:383–409. https://doi.org/10.1111/acfi.12463
Chen M, Ruan L, Zhu Z, Sang F (2020) Macro uncertainty, analyst performance, and managerial ability. Eurasian Bus Rev 10:333–353. https://doi.org/10.1007/s40821-020-00148-8
Chen TK, Liao HH, Chen WH (2017) CEO ability heterogeneity, board’s recruiting ability and credit risk. Rev Quant Finance Account 49:1005–1039. https://doi.org/10.1007/s11156-017-0615-3
Cheng TY, Li YQ, Lin YE, Chih HH (2020) Does the fit of managerial ability with firm strategy matters on firm performance. J Asian Finance Econ Bus 7:9–19. https://doi.org/10.13106/jafeb.2020.vol7.no4.9
Cheung KTS, Naidu D, Navissi F, Ranjeeni K (2017) Valuing talent: Do CEOs’ ability and discretion unambiguously increase firm performance. J Corp Finance 42:15–35. https://doi.org/10.1016/j.jcorpfin.2016.11.006
Choi W, Han S, Jung SH, Kang T (2015) CEO’s operating ability and the association between accruals and future cash flows. J Bus Financ Account 42:619–634. https://doi.org/10.1111/jbfa.12118
Cornaggia KJ, Krishnan GV, Wang C (2017) Managerial ability and credit ratings. Contemp Account Res 34:2094–2122. https://doi.org/10.1111/1911-3846.12334
Cox JS (2017) Managerial ability, growth opportunities, and IPO performance. Manag Financ 43:488–507. https://doi.org/10.1108/MF-07-2016-0218
Cui H, Chen C, Zhang Y, Zhu X (2019) Managerial ability and stock price crash risk. Asia-Pac J Account Econ 26:532–554. https://doi.org/10.1080/16081625.2019.1636662
Cui H, Leung SCM (2020) The long-run performance of acquiring firms in mergers and acquisitions: Does managerial ability matter? J Contemp Account Econ 16:100185. https://doi.org/10.1016/j.jcae.2020.100185
Curi C, Lozano-Vivas A (2020) Managerial ability as a tool for prudential regulation. J Econ Behav Organ 174:87–107. https://doi.org/10.1016/j.jebo.2020.03.023
De Franco G, Hope OK, Lu H (2017) Managerial ability and bank-loan pricing. J Bus Finance Account 44:1315–1337. https://doi.org/10.1111/jbfa.12267
Demerjian PR, Lev B, McVay SE (2009) Quantifying managerial ability: a new measure and validity tests. Work Pap Univ Utah
Demerjian PR, Lev B, McVay SE (2012) Quantifying managerial ability: A new measure and validity tests. Manag Sci 58:1229–1248. https://doi.org/10.1287/mnsc.1110.1487
Demerjian PR, Lev B, Lewis MF, McVay SE (2013) Managerial ability and earnings quality. Account Rev 88:463–498. https://doi.org/10.2308/accr-50318
Demerjian PR, Lewis MF, McVay SE (2020) How does intentional earnings smoothing vary with managerial ability? J Account Audit Financ 35:1–32. https://doi.org/10.1177/0148558X17748405
Dyreng SD, Hanlon M, Maydew EL (2019) When Does Tax Avoidance Result in Tax Uncertainty? Account Rev 94:179–203. https://doi.org/10.2308/accr-52198
Dziwornu RK (2017) Does managerial ability really drive cost efficiency? Evidence from boiler businesses. Manag Decis Econ 38:731–741. https://doi.org/10.1002/mde.2810
Edwards A, Schwab C, Shevlin T (2016) Financial constraints and cash tax savings. Account Rev 91:859–881. https://doi.org/10.2308/accr-51282
Fee CE, Hadlock CJ (2003) Raids, rewards, and reputations in the market for managerial talent. Rev Financ Stud 16:1315–1357. https://doi.org/10.1093/rfs/hhg031
Fernando GD, Jain SS, Tripathy A (2020) This cloud has a silver lining: Gender diversity, managerial ability, and firm performance. J Bus Res 117:484–496. https://doi.org/10.1016/j.jbusres.2020.05.042
Ferruz L, Muñoz F, Vargas M (2012) Managerial abilities: evidence from religious mutual fund managers. J Bus Ethics 105:503–517. https://doi.org/10.1007/s10551-011-0982-y
Francis J, Huang AH, Rajgopal S, Zang AY (2008) CEO reputation and earnings quality. Contemp Account Res 25:109–147. https://doi.org/10.1506/car.25.1.4
Galavotti I (2019) Firm-level recent profitability and acquisition performance: exploring competing theoretical perspectives. Eurasian Bus Rev 9:319–345. https://doi.org/10.1007/s40821-018-0111-2
Gan H (2019) Does CEO managerial ability matter? Evidence from corporate investment efficiency. Rev Quant Finance Account 52:1085–1118. https://doi.org/10.1007/s11156-018-0737-2
Gan H, Park MS (2017) CEO managerial ability and the marginal value of cash. Adv Account 38:126–135. https://doi.org/10.1016/j.adiac.2017.07.007
García-Meca E, García-Sánchez I (2018) Does managerial ability influence the quality of financial reporting? Eur Manag J 36:544–557. https://doi.org/10.1016/j.emj.2017.07.010
García-Sánchez I, Aibar-Guzmán B, Aibar-Guzmán C, Azevedo T (2020) CEO ability and sustainability disclosures: The mediating effect of corporate social responsibility performance. Corp Soc Responsib Environ Manag 27:1565–1577. https://doi.org/10.1002/csr.1905
García-Sánchez I, Hussain N, Martínez-Ferrero J (2019) An empirical analysis of the complementarities and substitutions between effects of ceo ability and corporate governance on socially responsible performance. J Clean Prod 215:1288–1300. https://doi.org/10.1016/j.jclepro.2019.01.130
García-Sánchez I, Martínez-Ferrero J (2019) Chief executive officer ability, corporate social responsibility, and financial performance: The moderating role of the environment. Bus Strategy Environ 28:542–555. https://doi.org/10.1002/bse.2263
Gillen DJ, Carroll SJ (1985) Relationship of managerial ability to unit effectiveness in more organic versus more mechanistic departments. J Manag Stud 22:668–676. https://doi.org/10.1111/j.1467-6486.1985.tb00017.x
Goodman TH, Neamtiu M, Shroff N, White HD (2014) Management forecast quality and capital investment decisions. Account Rev 89:331–365. https://doi.org/10.2308/accr-50575
Guan JX, Li OZ, Ma J (2018) Managerial ability and the shareholder tax sensitivity of dividends. J Financ Quant Anal 53:335–364. https://doi.org/10.1017/S0022109017001004
Gul FA, Khedmati M, Lim EK, Navissi F (2018) Managerial ability, financial distress, and audit fees. Account Horiz 32:29–51. https://doi.org/10.2308/acch-51888
Habib A, Hasan MM (2017) Managerial ability, investment efficiency and stock price crash risk. Res Int Bus Financ 42:262–274. https://doi.org/10.1016/j.ribaf.2017.07.048
Hair JF, Black WC, Babin BJ, Anderson RE (2019) Multivariate data analysis, 8th edn. Cengage Learning, Boston
Hambrick DC (2007) Upper Echelons Theory: An Update. Acad Manag Rev 32:334–343. https://doi.org/10.2307/20159303
Hambrick DC, Mason PA (1982) The Organization as a Reflection of Its Top Managers. Acad Manag Proc 1982:12–16. https://doi.org/10.5465/ambpp.1982.4976402
Hambrick DC, Mason PA (1984) Upper Echelons: The Organization as a Reflection of Its Top Managers. Acad Manage Rev 9:193–206. https://doi.org/10.5465/amr.1984.4277628
Harada N (2004) Productivity and entrepreneurial characteristics in new Japanese firms. Small Bus Econ 23:299–310. https://doi.org/10.1023/B:SBEJ.0000032038.32318.62
Hasan MM (2020) Readability of narrative disclosures in 10-K reports: Does managerial ability matter? Eur Account Rev 29:147–168. https://doi.org/10.1080/09638180.2018.1528169
Hayes RM, Schaefer S (1999) How much are differences in managerial ability worth? J Account Econ 27:125–148. https://doi.org/10.1016/S0165-4101(99)00007-5
Herawaty V, Solihah D (2019) The effect of CEO tenure, managerial skills and earning power on earnings manipulation with corporate governance as a moderating variable on manufcaturing companies in Indonesia Stock Exchange. Acad Account Financ Stud J 23:1–16
Hesarzadeh R, Bazrafshan A (2019) CEO ability and regulatory review risk. Manag Audit J 34:575–605. https://doi.org/10.1108/MAJ-08-2018-1958
Hoberg G, Kumar N, Prabhala N (2018) Mutual fund competition, managerial skill, and alpha persistence. Rev Financ Stud 31:1896–1929. https://doi.org/10.1093/rfs/hhx127
Holcomb TR, Holmes RM Jr, Connelly BL (2009) Making the most of what you have: managerial ability as a source of resource value creation. Strateg Manag J 30:457–485. https://doi.org/10.1002/smj.747
Hoque Z (2014) 20 years of studies on the balanced scorecard: Trends, accomplishments, gaps and opportunities for future research. Br Account Rev 46:33–59. https://doi.org/10.1016/j.bar.2013.10.003
Huang H, Sun L, Zhang J (2017) Environmental uncertainty and tax avoidance. Adv Tax 24:83–124. https://doi.org/10.1108/S1058-749720170000024002
Huang X, (S. ), Sun L, (2017) Managerial ability and real earnings management. Adv Account 39:91–104. https://doi.org/10.1016/j.adiac.2017.08.003
Kaplan SN, Klebanov MM, Sorensen M (2012) Which CEO characteristics and abilities matter? J Finance 67:973–1007. https://doi.org/10.1111/j.1540-6261.2012.01739.x
Khan SH, Saeed M, Fatima K (2009) Assessing the performance of secondary school headteachers: a survey study based on teachers’ views in Punjab. Educ Manag Adm Leadersh 37:766–783. https://doi.org/10.1177/1741143209345572
Khurana IK, Moser WJ, Raman KK (2018) Tax avoidance, managerial ability, and investment efficiency. Abacus 54:547–575. https://doi.org/10.1111/abac.12142
Koester A, Shevlin T, Wangerin D (2017) The role of managerial ability in corporate tax avoidance. Manag Sci 63:3285–3310. https://doi.org/10.1287/mnsc.2016.2510
Koijen RSJ (2014) The cross-section of managerial ability, incentives, and risk preferences. J Finance 69:1051–1098. https://doi.org/10.1111/jofi.12140
Krishnan GV, Wang C (2015) The relation between managerial ability and audit fees and going concern opinions. Audit J Pract Theory 34:139–160. https://doi.org/10.2308/ajpt-50985
Lee JE (2015) Managerial ability and the effectiveness of Internal control ever financial reporting. J Appl Bus Res 31:1781–1788
Lee S, Matsunaga SR, Park CW (2012) Management forecast accuracy and CEO turnover. Account Rev 87:2095–2122
Lee T, Liu HM (2018) How do firms with management ability promote competitive advantages? An integrated model from entrepreneurial strategy making and internal resources. Entrep Res J 8:1–15. https://doi.org/10.1515/erj-2017-0071
Lesser K, Rößle F, Walkshäusl C (2016) International socially responsible funds: Financial performance and managerial skills during crisis and non-crisis markets. Probl Perspect Manag 4:461–472. https://doi.org/10.21511/ppm
Li Y, Luo Y (2017) The contextual nature of the association between managerial ability and audit fees. Rev Account Finance 16:2–20. https://doi.org/10.1108/RAF-01-2016-0012
Luo Y, Zhou L (2017) Managerial ability, tone of earnings announcements, and market reaction. Asian Rev Account 25:454–471. https://doi.org/10.1108/ARA-07-2016-0078
Masuda T (2009) The profitable new Japanese entrepreneurs: The minor role of information technology. Int J Entrep Small Bus 7:24–58. https://doi.org/10.1504/IJESB.2009.021608
Masuda T (2010) Novice founders and re-starters in Japanese business society. Int J Bus Glob 5:304–327. https://doi.org/10.1504/IJBG.2010.035025
Mata ME (2009) Managerial strategies in canning industries: A case study of early twentieth century Portugal. Bus Hist 51:45–58. https://doi.org/10.1080/00076790802602180
Mishra CS (2019) Does managerial ability drive firm innovativeness? IEEE Trans Eng Manag. https://doi.org/10.1109/TEM.2019.2923892
Mishra DR (2014) The dark side of CEO ability: CEO general managerial skills and cost of equity capital. J Corp Finance 29:390–409. https://doi.org/10.1016/j.jcorpfin.2014.10.003
Mitra S, Jaggi B, Al-Hayale T (2019) Managerial overconfidence, ability, firm-governance and audit fees. Rev Quant Finance Account 52:841–870. https://doi.org/10.1007/s11156-018-0728-3
Mori N, Munisi G (2014) Evaluating the missing links in the relationship between executives’ compensation and firm performance. Int J Bus Glob 12:315–333. https://doi.org/10.1504/IJBG.2014.060215
Muñoz F, Vargas M, Marco I (2014) Environmental mutual funds: Financial performance and managerial abilities. J Bus Ethics 124:551–569. https://doi.org/10.1007/s10551-013-1893-x
Muteba Mwamba JW (2017) An empirical evaluation of hedge fund managerial skills using bayesian techniques. Asian Acad Manag J Account Financ 13:63–82. https://doi.org/10.21315/aamjaf2017.13.1.3
Nuthall PL (2001) Managerial ability—a review of its basis and potential improvement using psychological concepts. Agric Econ 24:247–262. https://doi.org/10.1016/S0169-5150(00)00069-4
Nuthall PL (2009) Modelling the origins of managerial ability in agricultural production. Aust J Agric Resour Econ 53:413–436. https://doi.org/10.1111/j.1467-8489.2009.00459.x
Pan Y, Wang TY, Weisbach MS (2015) Learning about CEO ability and stock return volatility. Rev Financ Stud 28:1623–1666. https://doi.org/10.1093/rfs/hhv014
Park J, Ko CY, Jung H, Lee YS (2016) Managerial ability and tax avoidance: evidence from Korea. Asia-Pac J Account Econ 23:449–477. https://doi.org/10.1080/16081625.2015.1017590
Park SY, Song Y (2019) The effect of managerial ability on firm’s dividend policy: evidence from Korea. Int J Entrep 23:1–15
Petkevich A, Prevost A (2018) Managerial ability, information quality, and the design and pricing of corporate debt. Rev Quant Financ Account 51:1033–1069. https://doi.org/10.1007/s11156-017-0696-z
Rego SO, Wilson R (2012) Equity risk incentives and corporate tax aggressiveness. J Account Res 50:775–810. https://doi.org/10.1111/j.1475-679X.2012.00438.x
Sahin C (2011) Managing professional service firms: role of managerial abilities. J Manag Dev 30:413–426. https://doi.org/10.1108/02621711111126882
Salehi M, Daemi A, Akbari F (2020) The effect of managerial ability on product market competition and corporate investment decisions: Evidence from Iran. J Islam Account Bus Res 11:49–69. https://doi.org/10.1108/JIABR-10-2016-0113
Salehi M, Mousavi Shiri M, Hossini SZ (2019) The relationship between managerial ability, earnings management and internal control quality on audit fees in Iran. Int J Product Perform Manag 69:685–703. https://doi.org/10.1108/IJPPM-07-2018-0261
Sarwar B, Kutan A, Ming X, Husnain M (2019) How do talented managers view dividend policy? Further evidence from Chinese equity market. Int J Emerg Mark 15:559–586. https://doi.org/10.1108/IJOEM-03-2019-0179
Scholefield J (1974) The significance of concepts, models and mental frameworks in the development of general managerial ability. Manag Educ Dev 5:75–84. https://doi.org/10.1177/135050767400500206
SeTin S, Murwaningsari E (2018) The effect of managerial ability towards earning quality with audit committee as moderating variable. J Bus Retail Manag Res 12:178–189
Shields MD (1997) Research in Management Accounting by North Americans in the 1990s. J Manag Account Res 9:3–61
Smutny P, Prochazka J, Vaculik M (2016) The relationship between managerial skills and managerial effectiveness in a managerial simulation game. Innovar 26:11–22. https://doi.org/10.15446/innovar.v26n62.59385
Sun L (2016) Managerial ability and goodwill impairment. Adv Account 32:42–51. https://doi.org/10.1016/j.adiac.2016.02.002
Sun L (2017) Managerial ability and chemical releases. Sust Account Manag Policy J 8:281–306. https://doi.org/10.1108/SAMPJ-09-2016-0062
Truong C, Garg M, Adrian C et al (2020) Political alignment and audit pricing. Int J Audit 24:205–231. https://doi.org/10.1111/ijau.12189
Veltri S, D’Orio G, Bonanno G (2016) Measuring managerial ability using a two-stage SFA-DEA approach. Knowl Process Manag 23:247–258. https://doi.org/10.1002/kpm.1528
Wang Z, Chen MH, Chin CL, Zheng Q (2017) Managerial ability, political connections, and fraudulent financial reporting in China. J Account Public Policy 36:141–162. https://doi.org/10.1016/j.jaccpubpol.2017.02.004
Young BS, Arthur W Jr, Finch J (2000) Predictors of managerial performance: More than cognitive ability. J Bus Psychol 15:53–72. https://doi.org/10.1023/A:1007766818397
Yuan Y, Tian G, Lu LY, Yu Y (2019) CEO ability and corporate social responsibility. J Bus Ethics 157:391–411. https://doi.org/10.1007/s10551-017-3622-3
Yung K, Chen C (2018) Managerial ability and firm risk-taking behavior. Rev Quant Financ Account 51:1005–1032. https://doi.org/10.1007/s11156-017-0695-0
Zang AY (2012) Evidence on the trade-off between real activities manipulation and accrual-based earnings management. Account Rev 87:675–703. https://doi.org/10.2308/accr-10196
Zhu M (2018) Informative fund size, managerial skill, and investor rationality. J Financ Econ 130:114–134. https://doi.org/10.1016/j.jfineco.2018.06.002
Acknowledgements
We would like to thank Deputy for Research and Development Empowerment, Ministry of Research and Technology/National Innovation Agency for the financial support provided for this study. This study is funded by the Ministry of Research and Technology/National Innovation Agency of the Republic of Indonesia under the scheme of PMDSU, contract number 2141/UN1/DITLIT/DIT-LIT/PT/2020.
Funding
This study is funded by the Ministry of Research and Technology/National Innovation Agency of the Republic of Indonesia under the scheme of PMDSU, contract number 2141/UN1/DITLIT/DIT-LIT/PT/2020.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
There is no conflict of interest.
Availability of data
All articles included in this study are accessible through the Scopus database.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Anggraini, P.G., Sholihin, M. What do we know about managerial ability? A systematic literature review. Manag Rev Q 73, 1–30 (2023). https://doi.org/10.1007/s11301-021-00229-6
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s11301-021-00229-6