Human Capital, Top Management Quality, and Firm Performance
74 Pages Posted: 20 Mar 2014 Last revised: 2 Jan 2020
Date Written: May 6, 2014
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
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