Managerial Ability, Earnings Quality, and Future Performance

Abstract

Objective: This study aims to clarify the relationship between managerial ability, earnings quality, and the future performance of non-financial companies listed on the Amman Stock Exchange (ASE).

Method: Based on a sample of data extracted from annual financial reports issued from 2002 to 2015, a panel-corrected standard error (PCSE) model is used to test the study's hypotheses.

Results: The results indicate a positive relationship between the managerial ability of executives and the quality of earnings. The study also shows a positive relationship between managerial ability and future performance. Additionally, the results confirm an inverse relationship between the quality of earnings and future performance in companies with highly capable executives.

Conclusions: The study's findings will provide top management in non-financial companies with insights to better understand the relationship between managerial ability and earnings quality.