Managerial Ability and Firm Performance in Malaysia: Do Familiness and Foreignness of the CEOs Matter?

Abstract

This study examines whether the relationship between managerial ability and firm performance is driven by familiness and foreignness of the CEOs. We divide the sample of CEOs according to their familiness and foreignness and estimate CEOs abilities via DEA and Tobit regression. We then employed dynamic GMM panel estimator to address the endogeneity issues. Based on a sample of 361 firms in Malaysia over 2011–2015, we documented empirical evidence that managerial ability of local CEOs with foreign working or education experience are most positively related to Tobin’s Q, followed by local CEOs without foreign experience. We further found that local CEOs contribute to firm performance only if they are not family connected with the firm. Last, our findings also suggest that the presence of foreign CEOs improve the firm performance when they are nonfamily CEOs originated from high management practice countries.

Chairperson and CEO foreignness and CG quality of emerging markets MNCs: Moderating role of international board interlocks

“…Specifically, the appointment of FCEOs improves CG quality of EMMNCs by approximately 7.58%. This result is consistent with the recent findings of Chuah and Foong (2019) that FCEOs improve corporate outcomes but contrast the result of Vo, Nguyen, Tuan, Luu, & Vu (2020) that foreign CEOs under-perform in countries with good governance supporting institutions. Nonetheless, our finding indicates that non-native CEOs improve the CG quality of EMMNCs due to their experience and knowledge from different governance institutions.…”

“…This suggests international interlocks enhance the likelihood of FCEOs to strengthen governance practices of EMMNCs through the repeated game of governance isomorphism. Our results is consistent to the findings of Chuah and Foong (2019); Field, Lowry, and Mkrtchyan (2013) and suggest that, despite the busyness of interlocked directors, their advisory due to the experience in foreign boards enhances the ability of foreign CEOs in weak governance enforcement environments to improve on the CG practices of firms.…”

“…Specifically, we show that FCEOs and FIBCs are important channels of governance mobility that positively impacts on EMMNCs' governance quality at home. Third, we extend board interlock literature (Cai et al, 2014;Chuah & Foong, 2019;Falato et al, 2014;Field et al, 2013) by incorporating an international perspective of the latter and showing how this affects the ability of agents of CG mobility to impact on MNCs governance quality at home. Specifically, we evidence that, while EMMNCs interlock with foreign boards may advance the ability of FCEOs to export international CG practices to EMs, it negatively affects the likelihood of FIBCs to diffuse CG practices due to directors busyness with boardroom commitments in other countries.…”

Managerial ability in founding-family firms: evidence from Indonesia

“…Sener (2014) examines the founding-family firms in Turkey and finds that CEO in founding-family firms contributes to lower both accounting and market performance. Chuah and Foong (2019) find that nonfamily CEOs have better performance than family ones. Ntoung et al (2017) find that family ownership, especially first-generation founder ownership, reduces firm performance.…”

Managerial Ability as a Mechanism for Creating Firm Value through Risk Management

“…Research by Ng and Daromes (2016);La'bi et al (2018); Chuah and Foong (2019); Gong et al (2019);and Bhutta et al (2021) find that overall managerial ability plays a vital role in increasing firm value. The experience and insight possessed by a manager will improve managerial ability to increase the firm value further.…”