Top Managers' Academic Credentials and Firm Value

This study investigates whether top management teams' (TMTs) academic credentials from prestigious universities can be a source of competitive advantage. We examine the academic backgrounds of 72,165 top managers in 590 non-financial firms in South Korea from 1990 to 2006. We find that firms with a higher proportion of top managers from top universities have a higher Tobin's Q. Furthermore, this relation is stronger in challenging environments when firms face higher volatility, more growth opportunities, or financial distress, or when managers have greater discretionary power or are held accountable for their decisions. These results suggest that the effects of TMTs' human capital on firm value vary in the contexts of organizational and corporate environments. In short, our study suggests that education from elite schools is an important managerial attribute that contributes to performance.