IMPACT OF EXTERNAL ENVIRONMENTAL UNCERTAINTY ON MANAGERIAL ABILITY

摘要

In this paper, we examine and find a negative relation between external environmental uncertainty and managerial ability, suggesting that volatile or risky external business environments dampens managerial performance. We perform various additional tests including an alternative external environmental uncertainty measure, changes analysis and two-stage OLS analysis (2SLS). Our results are consistent across all tests. Furthermore, we find that the relation between external environmental uncertainty and managerial ability becomes stronger in smaller firms. To our knowledge, this is the first empirical study that performs a direct test on the link between external environmental uncertainty and managerial ability.