This paper investigates the link between managers' ability and working capital efficiency. The main conjecture of the study is that managerial ability is positively associated with working capital efficiency. Using a sample of US companies, the paper finds that increased managerial ability moves the working capital toward the optimal level. This study extends the working capital management literature by showing that managerial ability elicits working capital efficiency. This result sheds light on the benefits of hiring managers with higher abilities. The study contributes to the relatively new field of managerial ability, by examining an important economic consequence of managerial ability on companies' value. Furthermore, this study contributes to the field of working capital management, by investigating another factor that influences the level of NWC. These results may be valuable in practice when considering the cost and benefits of hiring a higher-ability manager.
Keywords: working capital efficiency, working capital management, managerial ability.