Managerial Ability and Discontinued Operations

• In Event: Managerial Accounting Issues

Abstract

This study examines the impact of managerial ability on discontinued operations. We posit a negative relation between managerial ability and discontinued operations because prior research suggests that more-able managers are more successful in managing their firms (Demerjian, Lev, and McVay, 2012). Therefore, firms with more-able managers are less likely to discontinue their business segments. Our results are consistent with the hypothesis, and are robust to different sample periods, alternative regression specifications, and numerous control variables. We also find that our results are mainly driven by firms reporting income-decreasing (negative) discontinued operations.

Authors

• Christopher J. Skousen, Utah State University

• Li Sun, University of Tulsa

• Kean Wu, Rochester Institute of Technology