Corporate policies and outcomes during the COVID-19 crisis: Does managerial ability matter?

The devastating impacts of the COVID-19 pandemic have forced firms to formulate strategies that can help them effectively cope with the crisis. In this study, we investigate whether and how managerial ability affects the corporate policies and outcomes during the COVID-19 crisis. Specifically, we investigate how managerial ability affects the policies of firms related to investment, financing, cash holdings, and dividend payouts. We also explore whether firm performance is influenced by managerial ability. Using quarterly data of Chinese firms during 2020, results show that firms with higher ability managers reduce their investments, financing, and cash holdings, yet increase their dividend payouts during the COVID-19 crisis. Findings also indicate that firms having more capable managers tend to outperform those having less capable managers. Results of our additional analyses reveal that general ability carries more value than special ability and that managerial ability has varying effects on state-owned and non-state-owned firms. These results contribute to the literature by highlighting managerial ability as a critical determinant of firm performance and policies at times of uncertainty.

Can we learn lessons from the past? COVID-19 crisis and corporate governance responses

Abstract The coronavirus (COVID-19) pandemic has seriously threatened the lives of the people. The pandemic has also threatened the survival of the firms, which has drawn the attention of policymakers and corporate governance practitioners around the world. In this study, we focus on how corporate governance practices can help firms to survive during COVID-19 crisis. For this purpose, we take insights from prior crises by reviewing leading business journals articles and identify key corporate governance mechanisms that could potentially be effective in the ongoing COVID-19 crisis. Our review of a large body of literature highlights several governance mechanisms that may help firms to cope with COVID-19 crisis. These governance attributes include risk management committees, board diversity, independent directors, foreign investors, institutional ownership, ownership concentration, CEO's dual roles, block ownership, and family ownership. We provide several policy implications after reviewing the corporate governance literature. Our review illustrates that firms may be subject to at least one of the identified governance mechanisms and they may learn how these governance attributes can be effective in the COVID-19 crisis. Our review illustrates that independent risk management committees, institutional ownership, board independence, blockholders, and family ownership are some of the essential and effective governance mechanisms compared to other governance attributes during COVID-19 crisis.