An Empirical Study On Firms’ Value Based On Managerial Ability

In recent year,the capital market of China has been developed rapidly.For example,the value of China’s stock market reached 25.2134 trillion RMB in the end of 2009 and surpassed Japan’s capital market to become the second global market capitalization after America.Driven by the strategic concepts of "the Belt and Road Initiatives"&"Intelligent Manufacturing in China 2025" and the policy of"Registration"&"the Third New Board",the scale of market financing will be expanded rapidly in the future.however,for the large number of low maturity investors,the expanding of the capital market and the growth of the number of the listed enterprises mean not only opportunities,but more confused when choosing stock target.Further,managers,as one of the core competitiveness of enterprises,had been received extensive attention by investors.Many managers’ individual incidents r have made great shock in stock price,what raises investors to think of "What is the relation between managerial ability and enterprise value" or "Does manager’s ability really affect evaluation of enterprise value".Based on literature review,it found that large number of studies about manager ability and enterprise’s value mainly concentrated in the following aspects:the study of the relationship between managers’ characteristics and firm performance;second,the study of the managers’ individual incidents that may affect the firm’s value;the study of the relationship between manager’s ability that calculate by two-stage DEA method and enterprise management behavior or economic effects.However,research on corporate value from perspective of managerial characteristics、manager individual incidents and managerial the other economic effect to enterprise may cause deviation for limitation of the two method of measuring managers’ ability.Second,all of study just indirectly reflected the relationship between managerial ability and corporate value,but not explore how the factors that affect the relationship between firms value and managerial ability.Finally,the two-stage DEA method is a scientific method,but in the second stage when eliminating the firm’s factor to obtain managers’ ability lose sight of the nature of property right and the region.Based on theoretical study and realistic background,we define managerial ability as managers’ efficiency in generating revenues,using the listed firms of China over the period from 2006 to 2015 as research objects and collecting the data from Flush database、annual report、Sina finance and so on,this paper try to examine the relation between managerial ability and firm market value or "Are investors willing to pay for managerial ability".Furthermore,this study examine the factors which affect the relation between managerial ability and firm market value,or the factors which affect investors’ willing to pay for managerial ability.The result show that,(a)in term of the whole market,the relation between managerial ability and firm market value is significant,which managerial ability should be treat as a important indicator to value investing;(b)compared with the state-owned enterprises,the relationship between managerial ability and enterprise market value is more significant among non-state-owned enterprises,or the investors are more willing to pay higher cost of equity for managerial ability of non-state-owned enterprises;(c)compared with lower growth firm,the relationship between managerial ability and enterprise market value is more significant among higher growth firm,or the investors are more willing to pay higher cost of equity for managerial ability higher growth firm;(d)compared with lower competitive industries,the relationship between managerial ability and enterprise market value is more significant among higher competitive industries,or the investors are more willing to pay higher cost of equity for managerial ability of higher competitive industries;(f)compared with low regional marketization level,the relationship between managerial ability and enterprise market value is more significant among higher regional marketization level,or the investors are more willing to pay higher cost of equity for managerial ability of in higher regional marketization level.The paper provides theoretical guidance and empirical evidence to help investors to stock investment based on managerial ability.