Working capital management and managerial talent

What is it about?

Talented managers arguably remain quintessential to firm value and performance. While the literature shows supporting evidence for the long-term orientation of talented managers, there is a dearth of evidence on their short-term performance. Here, we examine the relationship between managerial talent and working capital management. We employ a panel fixed-effect method controlling for firm-year and firm-industry for non-financial and non-utility firms for the years 1980 through 2016. We find the association between managerial talent and WCM to be positive and significant. The results indicate that talented managers have a higher cash conversion cycle. The empirical evidence still holds after controlling for social capital, religiosity, and financial constraints. Also, the evidence holds by employing an interaction term between Tobin's Q as a proxy for investment opportunities and talented managers.

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