Mergers and acquisitions: does performance depend on managerial ability?

Companies in difficult financial situations may seek to survive through mergers and acquisitions. Managers must be able to use company resources efficiently to maintain and improve competitiveness and sustainable advantages. Managers' ability to make strategic decisions may determine whether a merger and acquisition is successful. This study aims to reveal the role of the acquirer's managerial ability in mergers and acquisitions based on short- and long-term performance as well as the type of M&A. Two metrics are used to assess short- and long-term performance: the market-to-book ratio (MTBR) as an indicator of operating performance and the buy-and-hold abnormal return (BHAR) as an indicator of stock return performance. The research sample consists of 153 M&A cases conducted by companies registered with the Business Competition Supervisory Commission in Indonesia between 2010 and 2017, and the performance till 2020. We used regression and difference analysis to analyze the data. We find that managerial ability has a positive impact on MTBR operating and BHAR stock performance. This result confirms that the higher ability of the acquirer's manager will ensure a successful M&A in the long run. Investors and potential investors might consider managerial ability in choosing investments in companies after an M&A. This study contributes to the M&A literature by examining the role of MA in the short- and long-term performance of acquiring firms following M&As in Indonesia.

Mathematical modeling of optimal allocation of remote workforce: an interdisciplinary investigation with Hofstede's cultural factors and managerial ability

PurposeAs the pandemic begins to ease, many companies are figuring out that working remotely is the future of work and "a new normal”. This research focuses on strategic planning and practices inherent in remote work, and aims to identify the optimal balance between virtual and on-site working. Specifically, the authors investigate the moderating effects of managerial ability and Hofstede's cultural factors.Design/methodology/approachThe authors build a mathematical model to locate the optimal balance between virtual and on-site working. A numerical study is presented, and additional sensitivity analysis is conducted to validate the proposed model.FindingsThis model provides organizations with a general guideline with recommended optimal percentages of remote workforce based on specific Hofstede's national scores. The authors also find that organizations with varying levels of managerial ability exhibit different adoption rates of remote working.Research limitations/implicationsBecause of the chosen research approach, the proposed model may lack empirical verification and require further adjustment of parameters. Therefore, researchers are encouraged to empirically and statistically test the proposed model further.Practical implicationsThis model equips organizations and practitioners with a general guideline to identify their desired portion of remote workforce. The incorporation of managerial ability and cultural factors makes our model applicable to various business structures across different sectors.Originality/valueThis proposed model addresses this optimization problem from a mathematical perspective with an interdisciplinary approach. The model also considers the moderating effects of managerial ability and Hofstede's cultural factors.HighlightsThe main contribution of this study is the theoretical development of our mathematical model that identifies the optimal balance between remote and on-site workforce in the context of managerial ability and Hofstede's cultural factors.A numerical study is presented, and additional sensitivity analysis is conducted to validate the proposed model and highlight the moderating effect of managerial ability and cultural influence on the adopted percentages of remote working.Our study suggests that organizational capabilities, managerial skills, and culturally suitable work arrangement are vital in successful development and implementation of remote working policy.Practical managerial implications and general guidelines are offered to organizations and practitioners.

Leadership in a pandemic: Do more able managers keep firms out of trouble?

The Coronavirus crisis has led to unprecedented economic shocks to the corporate world and challenged how corporate management contributes to business resilience amid the pandemic. Employing a novel measure of managerial ability constructed for a large sample of U.S. publicly listed firms, we document that firms led by higher managerial ability exhibit lower stock return volatility, higher operating performance, and lower levels of default risk amid the pandemic. A difference-in-differences analysis suggests that the impact of managerial ability on firm performance is stronger during the pandemic than during the pre-pandemic period. The effect of managerial competency on corporate resiliency is more pronounced among firms that have high exposure to COVID-19. In addition, firms led by high managerial competency management are associated with higher stock liquidity and are less likely to exhibit employment, healthcare, safety, and consumer protection related violations amid the pandemic.

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.

Firm performance during the Covid-19 crisis: Does managerial ability matter?

Challenged by the Covid-19 crisis, CEOs must rethink about how to operate and exist in the new working environment. We examine if managerial ability of the CEO impacts firm performance during the crisis period. We find a positive and significant association between the CEO managerial ability and both the cumulative raw and abnormal returns. We also find that firms with better CEO managerial ability are more resilient and have higher ROE than their counterparts. We find that the CEOs with higher managerial ability have higher pre-pandemic liquidity which in part explains the better performance amid the Covid-19 crisis.