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Matching firms, managers and incentives

Bandiera, Oriana and Guiso, Luigi and Prat, Andrea and Sadun, Raffaella (2015) Matching firms, managers and incentives. Journal of Labor Economics, 33 (3). pp. 623-681. ISSN 0734-306X

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Identification Number: 10.1086/679672

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 de-termining how firms select and motivate managers. In particular, risk-averse managers are matched with firms whose compensation scheme depends less on performance. 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: Article
Official URL: http://www.press.uchicago.edu/ucp/journals/journal...
Additional Information: © 2015 University of Chicago Press
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HC Economic History and Conditions
Sets: Departments > Economics
Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
Date Deposited: 01 Jul 2014 11:59
Last Modified: 29 Jun 2016 23:00
Funders: Fondazione Rodolfo Debenedetti
URI: http://eprints.lse.ac.uk/id/eprint/57271

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