The Managerial Ability and Value of Cash: Evidence from Iran

• Main Authors: Saeid Aliahmadi, Ali Jamshidi, Rasoul Mousavi
• Format: Article
• Language: English
• Published: Islamic Azad University of Arak 2016-10-01
• Series: Advances in Mathematical Finance and Applications
• Subjects: Managerial Efficiency; Managerial Ability; Value of Cash Holding
• Online Access: http://amfa.iau-arak.ac.ir/article_526241_56ef5ba66cda9cf28d17130ab624d6ca.pdf

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