Matching firms, managers, and incentives

Bandiera, Oriana, 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:	22 Feb 2024 09:54
URI:	http://eprints.lse.ac.uk/id/eprint/121776

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