Managerial Ability, Earnings Quality, and Future Performance

Abstract

This study aims to clarify the relationship between managerial ability, earnings quality, and future performance of non-financial companies listed on the Amman Stock Exchange (ASE). Based on a sample of data extracted from annual financial reports issued during the period 2002–2015, a panel-corrected standard error model (PCSE) is used to test the study hypotheses. The results indicate that there is a positive relationship between the managerial ability of executives and the quality of earnings. The study also shows a positive relationship between the managerial ability of executives and future performance. Moreover, the results confirm the inverse relationship between the quality of earnings and future performance in companies whose executives have high abilities. The findings of the study would provide top management in non-financial companies with insights that help them focus their attention on the relationship between managerial ability and earnings quality.