Human Capital, Top Management Quality, and Firm Performance

74 Pages Posted: 20 Mar 2014 Last revised: 2 Jan 2020

See all articles by Thomas J. Chemmanur

Thomas J. Chemmanur

Boston College - Carroll School of Management

Lei Kong

University of Alabama - Department of Economics, Finance and Legal Studies

Karthik Krishnan

Northeastern University

Qianqian Yu

Lehigh University

Date Written: May 6, 2014

Abstract

We analyze the relationship between top management team human capital (“management quality”) and long-run firm performance using panel data from BoardEx. We control for the potentially endogenous matching between firm and management quality using as instrument a plausibly exogenous shock to the supply of new managers. We further identify the relationship between top management quality and firm performance using differences in the mobility of top management across states and the differential effects on firms of natural disasters occurring across various US states. Overall, we find a causal relationship between management quality and firm operating performance, market valuation, and stock returns.

Keywords: Human Capital; Management Quality; Operating Performance; Market Valuation; Stock Return

JEL Classification: G32; L25

Suggested Citation

Chemmanur, Thomas J. and Kong, Lei and Krishnan, Karthik and Yu, Qianqian, Human Capital, Top Management Quality, and Firm Performance (May 6, 2014). Northeastern U. D’Amore-McKim School of Business Research Paper No. 2014-01, Available at SSRN: https://ssrn.com/abstract=2411231 or http://dx.doi.org/10.2139/ssrn.2411231

Thomas J. Chemmanur (Contact Author)

Boston College - Carroll School of Management ( email )

Finance Department, 436 Fulton Hall
Carroll School of Management, Boston College
Chestnut Hill, MA 02467-3808
United States
617-552-3980 (Phone)
617-552-0431 (Fax)

HOME PAGE: http://https://www2.bc.edu/thomas-chemmanur/

Lei Kong

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Karthik Krishnan

Northeastern University ( email )

360 Huntington Avenue
414C Hayden Hall
Boston, MA 02115
United States
617-373-4707 (Phone)

HOME PAGE: http://www.northeastern.edu/kkrishnan

Qianqian Yu

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

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