Is management quality value relevant?

Agarwal, V. and Taffler, R. and Brown, M. (2011) Is management quality value relevant? Journal of Business Finance and Accounting, 38 (9-10). pp. 1184-1208. ISSN 0306686X (ISSN)

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Using a unique database of management quality ratings over a 17 year period, we find that while good management appears to be associated with lower subsequent market returns, this is entirely consistent with an informationally efficient market. Quality of management is value relevant in that better managed firms have lower cost of equity, more stable earnings, higher profitability that persists over time, and higher market valuations using the Ohlson (1995 and 2001) method. Potentially endogenous relationships are unlikely to be driving our results. While well managed firms are 'good firms', contrary to the belief of many market participants their stocks perform no better than those of poorly managed firms. © 2011 Blackwell Publishing Ltd.

Item Type: Article
Identification Number:
Date: November 2011
Uncontrolled Keywords: Cost of equity, Efficient market hypothesis, Expected returns, Management reputation, Management Today, Resource based view
Subjects: N200 Management studies
Divisions: REF UoA Output Collections > REF2021 UoA17: Business and Management Studies
Faculty of Business, Law and Social Sciences > Birmingham City Business School > Dept. Management, HR and Enterprise
Depositing User: Hussen Farooq
Date Deposited: 29 Nov 2016 16:40
Last Modified: 29 Nov 2016 16:40

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