Unlikely sabotage: Comment on Bloomfield, Marvão, and Spagnolo

Jonathan M. Karpoff

Journal of Accounting and Economics, 2023, vol. 76, issue 2

Abstract: Bloomfield, Marvão, and Spagnolo (2023) establish an interesting yet puzzling finding: Firms in concentrated industries that form cartels are more likely to use relative performance evaluation (RPE) compensation arrangements for their top managers. The paper interprets this as evidence that cartel members constrain managers' incentives to engage in costly sabotage when their compensation depends on their peer firms' performance. I argue that successful costly sabotage to gain an RPE advantage is extremely unlikely and that costly sabotage is more likely among cartel firms than non-cartel firms. It therefore is an unlikely explanation of the paper's main finding. I propose an alternative explanation, that RPE benchmarks include firms that are not cartel member firms.

Keywords: Sabotage; Predation; Cartels; Relative performance evaluation (search for similar items in EconPapers)
JEL-codes: G34 G38 K21 L12 L13 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:76:y:2023:i:2:s0165410123000307

DOI: 10.1016/j.jacceco.2023.101606

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