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Managerial Ability and Firm Performance in Malaysia: Do Familiness and Foreignness of the CEOs Matter?

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  • Shu-Fen Chuah

    (School of Management, Universiti Sains Malaysia, 11800 Penang, Malaysia)

  • Swee-Sim Foong

    (School of Distance Education, Universiti Sains Malaysia, 11800 Penang, Malaysia)

Abstract

This study examines whether the relationship between managerial ability and firm performance is driven by familiness and foreignness of the CEOs. We divide the sample of CEOs according to their familiness and foreignness and estimate CEOs abilities via DEA and Tobit regression. We then employed dynamic GMM panel estimator to address the endogeneity issues. Based on a sample of 361 firms in Malaysia over 2011–2015, we documented empirical evidence that managerial ability of local CEOs with foreign working or education experience are most positively related to Tobin’s Q, followed by local CEOs without foreign experience. We further found that local CEOs contribute to firm performance only if they are not family connected with the firm. Last, our findings also suggest that the presence of foreign CEOs improve the firm performance when they are nonfamily CEOs originated from high management practice countries.

Suggested Citation

  • Shu-Fen Chuah & Swee-Sim Foong, 2019. "Managerial Ability and Firm Performance in Malaysia: Do Familiness and Foreignness of the CEOs Matter?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 22(03), pages 1-31, September.
    • Handle: RePEc:wsi:rpbfmp:v:22:y:2019:i:03:n:s0219091519500176
    DOI: 10.1142/S0219091519500176
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