Matching Firms, Managers, and Incentives

Oriana Bandiera, Luigi Guiso, Andrea Prat and Raffaella Sadun

CEP Discussion Papers from Centre for Economic Performance, LSE

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.

Keywords: personnel economics; hiring policy; management; performance related pay; performance incentives (search for similar items in EconPapers)
JEL-codes: J24 L2 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://cep.lse.ac.uk/pubs/download/dp1144.pdf (application/pdf)

Related works:
Journal Article: Matching Firms, Managers, and Incentives (2015)
Working Paper: Matching firms, managers and incentives (2015)
Working Paper: Matching firms, managers, and incentives (2012)
Working Paper: Matching Firms, Managers, and Incentives (2011)
Working Paper: Matching Firms, Managers and Incentives (2011)
Working Paper: Matching Firms, Managers, and Incentives (2009)
Working Paper: Matching Firms, Managers, and Incentives (2009)
Working Paper: Matching Firms, Managers and Incentives (2009)
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