Matching firms, managers, and incentives

Oriana Bandiera, Luigi Guiso, Andrea Prat and Raffaella Sadun

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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)
Pages: 49 pages
Date: 2012-05-06
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Downloads: (external link)
http://eprints.lse.ac.uk/121776/ Open access version. (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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