The Managerial Ability and Value of Cash: Evidence from Iran

Document Type: Research Paper


1 Department of Accounting, Isfahan, Khorasgan Branch, Islamic Azad University, Isfahan, Iran

2 Department of Mathematics, Isfahan, Khorasgan Branch, Islamic Azad University, Isfahan, Iran


This study investigates empirically the value investors place in excess cash holding
and how managerial ability impact on the value of cash holding for Iranian
firms from 2006 to 2014. In this research, managerial ability calculated by using
the data envelopment analysis (DEA). Following the approach of Faulkender and
Wang, we find that the relation between managerial ability and value of cash holding
and the level of cash is positive and significant. This result indicates that when
managers allocate cash resources efficiently, shareholders consider more value for
the firm cash holding. Also, the result shows that if managers emphasize both
long-term and short-term of resource management, investors set a higher marginal
value of cash holdings. In the other words, the able management can improve the
value of cash holding by the focusing on the spending resource for both long and
short-term periods.


Main Subjects

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