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Regulatory oversight and managerial ability

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Abstract

This paper examines whether regulatory oversight affects managerial ability. To measure regulatory oversight, I use comment letters from two Iranian regulatory agencies. Furthermore, to measure managerial ability, I employ managerial ability-score introduced by Demerjian et al. (Management Science 58(7):1229–1248, 2012). Using a difference-in-differences design with a propensity score matching approach, I reveal that the managerial ability of a firm is enhanced following the receipt of a comment letter by the firm. I further reveal that the managerial ability of a firm is enhanced following the receipt of a comment letter by the firm’s industry peers. Collectively, the findings highlight the internalities and externalities of regulatory oversight in the context of managerial ability.

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Notes

  1. This database is the most comprehensive database in TSE (Hesarzadeh 2019; Hesarzadeh and Rajabalizadeh 2019).

  2. Notably, in this study, untabulated VIFs are all smaller than two suggesting that multicollinearity is insignificant issue.

  3. Notably, for brevity, the table does not present the PS matching model and the test of difference in means of matched paired (i.e., equivalent tables for Tables 4 and 5). Nevertheless, untabulated results indicate that the matching process is effective.

  4. In our sample, 31 observations have received both SEO and NSO comment letters.

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  1. Ferdowsi University of Mashhad, Mashhad, Iran

    Reza Hesarzadeh

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  1. Reza Hesarzadeh
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Correspondence to Reza Hesarzadeh.

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Hesarzadeh, R. Regulatory oversight and managerial ability. Eurasian Bus Rev 10, 559–585 (2020). https://doi.org/10.1007/s40821-020-00150-0

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