The Managerial Ability and Value of Cash: Evidence from Iran

Subject Areas : Financial Accounting

Saeid Aliahmadi ¹ , Ali Jamshidi ² , Rasoul Mousavi ³

1 - Department of Accounting, Isfahan, Khorasgan Branch, Islamic Azad University, Isfahan, Iran
2 - Department of Mathematics, Isfahan, Khorasgan Branch, Islamic Azad University, Isfahan, Iran
3 - Department of Accounting, Isfahan, Khorasgan Branch, Islamic Azad University, Isfahan, Iran

Received: 2016-07-26 Accepted : 2016-09-01 Published : 2016-10-01

Keywords: Managerial Efficiency, managerial ability, Value of Cash Holding,

Abstract :

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

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