How Does a Firm’s Earnings Response Coefficient Vary with Managerial Ability? Evidence from Korea

Yewon Kim, Sera Choi, Bum Joon Kim

Research output: Contribution to journalArticlepeer-review

Abstract

This study investigates managerial ability’s effect on firms’ earnings response coefficients (ERCs). We find that ERC increases with managerial ability, suggesting that investors more favorably perceive earnings from competent managers. Further, managerial ability influences ERC via the information environment; the influence is positive only for firms with better information environments. Meanwhile, since foreign investors have incentive to improve the information environment to overcome their informational asymmetry, the positive managerial ability-ERC association is more pronounced when firms have higher foreign ownership. These results indicate that managerial ability is an important determinant of ERC and that the information environment explains their relationship.

Original languageEnglish
Pages (from-to)1104-1114
Number of pages11
JournalEmerging Markets Finance and Trade
Volume59
Issue number4
DOIs
StatePublished - 2023

Bibliographical note

Publisher Copyright:
© 2022 Taylor & Francis Group, LLC.

Keywords

  • earnings response coefficient
  • foreign ownership
  • information environment
  • Managerial ability

Fingerprint

Dive into the research topics of 'How Does a Firm’s Earnings Response Coefficient Vary with Managerial Ability? Evidence from Korea'. Together they form a unique fingerprint.

Cite this