Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent

Viral Acharya, Marco Pagano and Paolo Volpin

No 18891, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We present a model in which managers are risk-averse and firms compete for scarce managerial talent ("alpha"). When managers are not mobile across firms, firms provide efficient compensation, which allows for learning about managerial talent and for insurance of low-quality managers. When instead managers can move across firms, firms cannot offer co-insurance among employees. In anticipation, risk-averse managers may churn across firms or undertake aggregate risks in order to delay the revelation of their true quality. The result is excessive risk-taking with pay for short-term performance and an accumulation of long-term risks. We conclude with a discussion of policies to address the inefficiency in compensation.

JEL-codes: D62 G01 G2 G32 G38 J38 (search for similar items in EconPapers)
Date: 2013-03
New Economics Papers: this item is included in nep-cta
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

Published as Viral Acharya & Marco Pagano & Paolo Volpin, 2016. "Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent," Review of Financial Studies, Society for Financial Studies, vol. 29(10), pages 2565-2599.

Downloads: (external link)
http://www.nber.org/papers/w18891.pdf (application/pdf)

Related works:
Journal Article: Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent (2016)
Working Paper: Seeking Alpha - Excess Risk Taking and Competition for Managerial Talent (2016)
Working Paper: Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent (2016)
Working Paper: Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent (2012)
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:nbr:nberwo:18891

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w18891

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().