Date of Award

Spring 5-2022

Document Type


Degree Name

Doctor of Philosophy (PhD)




Business Administration - Finance

Committee Director

John A. Doukas

Committee Member

Mohammad Najand

Committee Member

David Selover


More and more research has shown that the characteristics of top executives, especially CEOs, affect organizational decisions and behaviors. This dissertation primarily focuses on the role of executives’ managerial ability played in firm investment decisions, such as mergers and acquisitions (M&As) and corporate social responsibility (CSR) investment, and firm value.

Essay 1 examines whether high-ability managers’ earnings smoothing is motivated by the need to mitigate the adverse effects of heightened information asymmetry triggered by M&As on managers’ reputation capital and firm value. I document that acquirers with high-ability managers engage in more pre-acquisition earnings smoothing and experience more significant announcement abnormal returns and operating performance in post-M&A periods than their low ability counterparts. This result is consistent with the theory of managerial response to asymmetric information, amplified by M&As, where high-ability managers use earnings smoothing as a signaling device to ensure that the market quickly discovers their superior abilities, to increase acquirers’ future growth prospects.

Essay 2 investigates the predictive power of corporate social culture, as measured by CSR intensity, on shareholder wealth when M&As are carried out by managers with different traits. I find acquiring firms with talented managers are more inclined to engage in CSR activities to shape corporate social culture, thereby realizing larger short- and long-term gains than their counterparts. I also document that acquiring firms with higher levels of CSR commitment led by talented managers tend to acquire targets with similar corporate social culture and experience significantly positive post-merger returns, suggesting that corporate cultural similarity constitutes an important source of M&A synergies.

Essay 3 explores whether firms engaging in high levels of CSR can preserve firm value during unprecedented exogenous negative events such as the 2007–2008 global financial crisis. The empirical evidence shows, in normal times, a negative relation between CSR engagement and firm value, but, under adverse economic conditions, CSR could protect firm value by decreasing firm risks. Interestingly, I also find that firms with high investment efficiency, and firms run by talented managers engage in greater CSR activities benefiting shareholders during not only the normal time but also the abnormal time. This finding is consistent with the view that CSR can be a hedge strategy that preserves shareholder value by reducing corporate exposure to adverse economic states, but my evidence also points out that CSR can be a differentiation strategy to improve the firm value during the normal time when firms run by high-attribute managers.

Taken together, this dissertation makes contributions to the finance and management literature by revealing that managerial ability has an overwhelming influence on corporation investment decisions, such as earning smoothing strategy, shaping corporate social culture, and CSR engagement, that serves the interests of both shareholders and stakeholders. Furthermore, the empirical results show that the ability of acquiring firms’ talented managers to find a matching target is a very important premise in M&A decisions, because cultural similarity yields better acquisition synergies.


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