Matching firms, managers, and incentives

Bandiera, Oriana ORCID: 0009-0002-6817-793X, Guiso, Luigi, Prat, Andrea and Sadun, Raffaella (2012) Matching firms, managers, and incentives. CEP Discussion Papers (CEPDP1144). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Abstract

We exploit a unique combination of administrative sources and survey data to study the match between firms and managers. The data includes manager characteristics, such as risk aversion and talent; firm characteristics, such as ownership; detailed measures of managerial practices relative to incentives, dismissals and promotions; and measurable outcomes, for the firm and for the manager. A parsimonious model of matching and incentive provision generates an array of implications that can be tested with our data. Our contribution is twofold. We disentangle the role of risk-aversion and talent in determining how firms select and motivate managers. In particular, risk-averse managers are matched with firms that offer low-powered contracts. We also show that empirical findings linking governance, incentives, and performance that are typically observed in isolation, can instead be interpreted within a simple unified matching framework.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://cep.lse.ac.uk/_new/publications/discussion...
Additional Information:	© 2012 The Author(s)
Divisions:	Economics STICERD Centre for Economic Performance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor
JEL classification:	J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior
Date Deposited:	22 Feb 2024 09:54
Last Modified:	01 Nov 2024 05:00
URI:	http://eprints.lse.ac.uk/id/eprint/121776

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