Managerial Ability in Corporate Performance
Summary
Managerial ability refers to the capacity of executives to marshal firm resources, interpret complex information and steer strategic decision-making with precision. It encompasses both cognitive skills—such as analytical reasoning and foresight—and behavioural competencies like leadership and communication. Research demonstrates that high managerial ability enhances operational efficiency, optimises capital allocation and encourages innovation. It mitigates agency conflicts by aligning managerial incentives with shareholder interests, and it reduces information asymmetry by improving transparency in reporting and forecasting. In contemporary business environments, able managers play a pivotal role in addressing sustainability challenges, navigating digital transformation and managing climate risks. Across global markets, their decisions affect firm valuation, cost of capital and long-term resilience, underscoring the practical importance of selecting and developing managerial talent.
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Managerial Ability in Corporate Performance publication trend
The graph below shows the total number of articles in managerial ability in corporate performance across all publications each year (not limited to Nature Index journals).
Technical terms
Managerial ability: The combination of cognitive skills, experiential knowledge and behavioural competencies that enables executives to make effective strategic and operational decisions.
Agency theory: A framework analysing conflicts of interest between principals (shareholders) and agents (managers), and the mechanisms used to align their objectives.
Information asymmetry: A situation in which one party holds more or better information than another, often leading to suboptimal decision-making and market inefficiencies.
Bargaining power: The capacity of a firm or its managers to influence terms and conditions in negotiations, such as pricing, credit or contract provisions.
References
- The Effect of Managerial Ability on the Timeliness of Financial Reporting: The Role of Audit Firm and Company Size. Journal of Operational and Strategic Analytics (2023).
- Managerial ability and corporate greenhouse gas emissions. Journal of Economic Behavior & Organization (2023).
- Managerial ability and supply chain power. Journal of Contemporary Accounting & Economics (2024).
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