Sohrab Osta, Behrooz Badpa, Sakine Nowrozi,
year 15, Issue 57 (9-2023)
Abstract
Considering the important role of managers in the success of firms, the present research investigates the effect of managerial ability and managerial incentives on the firm's performance. Specifically, this study investigates how the managerial ability factor can have a significant impact on the profitability and risk of firms. By doing so, this study can provide several policy implications about how managerial ability can influence a firm's decisions and its related business policies. The statistical population of this research is the firms admitted to the Tehran Stock Exchange during the period of 2015 to 2019 and the sample includes 140 firms. The data of the research was extracted from Rahvard Navin software and the panel data method was used to estimate the model. In this study, the independent research variable is the managerial ability (Demirjan et al. model, 2012) and managerial incentives (CEO cash bonus), and the dependent variable is the firm's performance, where the firm's profitability and risk indicators are considered as performance criteria. The results of the research show that the managerial ability and cash reward of the CEO have a positive and significant relationship with the firm's profitability, in other words, more capable managers with high managerial incentives can have better profitability. Also, the ability of the managers and the CEO's cash bonus has a positive and significant effect on the firm's risk. The coefficients and significance levels related to control variables also show that firm size, sales growth, and firm growth have a positive and significant effect on firm profitability and firm risk. Accordingly, management's ability and motivations can affect the firm's decisions, business policies, and the firm's performance, including the firm's profitability and risk.
