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Evaluation of Managerial Ability in the Japanese Setting

Author

Listed:
  • Hsihui Chang

    (Lebow College of Business, Drexel University)

  • Souhei Ishida

    (Graduate School of Humanities and Social Sciences, Saitama University)

  • Takuma Kochiyama

    (Graduate School of Business Administration, Hitotsubashi University)

Abstract

Following Demerjian, Lev, and McVay (2012), we quantify managerial ability using a sample of Japanese listed firms for the period 2005-2015. Consistent with their findings, we find that the estimated managerial ability is strongly correlated with manager fixed effects. Further, we find that the managerial ability is economically and significantly associated with the stock price reactions to CEO turnovers and changes in future return on assets following CEO turnovers. Our results are robust to alternative specifi ations of DEA models and inputs used in the estimation of firm efficiency. We contribute to the literature by generalizing the validity of the managerial ability introduced by Demerjian, Lev, and McVay (2012) to a non-US setting.

Suggested Citation

  • Hsihui Chang & Souhei Ishida & Takuma Kochiyama, 2018. "Evaluation of Managerial Ability in the Japanese Setting," The Japanese Accounting Review, Research Institute for Economics & Business Administration, Kobe University, vol. 8, pages 1-22, December.
    • Handle: RePEc:kob:tjrevi:dec2018:v:8:p:1-22
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    References listed on IDEAS

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    Cited by:

    1. Souhei Ishida & Takuma Kochiyama & Akinobu Shuto, 2018. "Are More Able Managers Good Future Tellers? Learning from Japan (Forthcoming in Journal of Accounting and Public Policy)," CARF F-Series CARF-F-435, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo, revised Nov 2020.

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