Do Managers Affect Firm Value in an Emerging Market?



This paper examines whether managers affect firm performance in an emerging market. Using information on managers in publicly traded firms in Korea, we find that managers with better academic credentials improve Tobin’s Q. The impact of manager ability is more evident when management decision making becomes more critical. Manager ability becomes more important as government interventions become weaker after the economic crisis. Management effects are stronger in firms with higher growth opportunities, higher risks, or under financial distress. Stand-alone firms and firms with better corporate governance scores show stronger impacts of managers on firm value. A positive impact of manager ability on firm performance is robust when endogeneity issues are controlled. These findings still hold regardless of choices of managers; executive directors, outside directors, and CEOs. Taken together, these results suggest that managerial ability matters more to firms when the firms face challenges and managers have more decision scope and power.


 I. Introduction
 II. Manager’s ability and firm value
  A. Manager ability and Prestigious schooling
  B. Managerial ability and higher education in Korea
 III. Data
 IV. Analyses and Results
  A. Basic Results
  B. Cross-sectional variations
  C. Time-series variations before and after the crisis
  D. Governance and business organizations
 V. Analyses of robustness tests and results
  A. Endogeneity and causality issues
  B. Firm fixed effects and endogeneity problems.
  C. Executive managers, outside directors, and CEOs
  D. High academic credentials and managerial ability
  E. Social network or Managerial ability
 VI. Summary and conclusion


  • Sung Wook Joh College of Business Administration Seoul National University, Korea
  • Jin-Young Chung College of Business Administration Seoul National University, Korea


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