The efficiency edge: how managerial ability and working capital impact corporate performance

Managerial ability (MA) and working capital management efficiency (WCME) are recognized as key drivers of firm performance, yet their independent and complementary effects remain less explored. This study examines both constructs in an emerging market context using a balanced panel of 150 publicly listed Indian firms from the National Stock Exchange (2014–2023). MA is measured following Demerjian et al., while WCME is estimated via the Malmquist Productivity Index within a Data Envelopment Analysis framework. Firm performance is captured through ROA (accounting-based) and Tobin’s Q (market-based). The empirical analysis employs a Generalized Estimating Equation model. Results show that MA consistently enhances market-based performance, though its effect on short-term accounting profitability is weaker. WCME significantly influences firm valuation, underscoring the role of efficient liquidity management in shaping investor perceptions. However, evidence of a synergistic interaction between MA and WCME is limited, suggesting their performance effects are largely independent rather than multiplicative. Grounded in the Resource-Based View, Upper Echelons Theory, Agency Theory, and Signaling Theory, this study contributes an integrated analysis of managerial competence and working capital efficiency as distinct yet complementary drivers of sustainable firm value in an emerging economy.