Managerial Attributes, Incentives, and Performance

High wage workers and high wage firms

Jeffrey Coles and Zhichuan (Frank) Li

The Review of Corporate Finance Studies, 2020, vol. 9, issue 2, 256-301

Abstract: We examine the relative importance of observed and unobserved firm- and manager-specific heterogeneities in determining executive compensation incentives and firm policy, risk, and performance. First, we decompose executive incentives into time-variant and time-invariant firm and manager components. Manager fixed effects supply 73% (60%) of explained variation in delta (vega). Second, controlling for manager fixed effects alters parameter estimates and corresponding inference on observed firm and manager characteristics. Third, larger CEO delta (vega) fixed effects predict better firm performance (riskier corporate policies and higher firm risk). These results suggest that the delta (vega) fixed effect captures managerial ability (risk aversion). (JEL G3, G32, G34, J24, J31, J33)Received September 7, 2018; editorial decision February 21, 2020 by Editor Andrew Ellul.

Date: 2020
References: Add references at CitEc
Citations: View citations in EconPapers (28)

Downloads: (external link)
http://hdl.handle.net/10.1093/rcfs/cfaa004 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rcorpf:v:9:y:2020:i:2:p:256-301.

Access Statistics for this article

The Review of Corporate Finance Studies is currently edited by Andrew Ellul

More articles in The Review of Corporate Finance Studies from Society for Financial Studies
Bibliographic data for series maintained by Oxford University Press ().