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http://ssrn.com/abstract=1561903
 
 

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Matching Firms, Managers, and Incentives


Oriana Bandiera


London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Luigi Guiso


European University Institute

Andrea Prat


London School of Economics (LSE) - Department of Economics; Centre for Economic Policy Research (CEPR)

Raffaella Sadun


Harvard University - Strategy Unit; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

August 3, 2011

Journal of Labor Economics, Forthcoming
Harvard Business School Strategy Unit Working Paper No. 10-073

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.

Number of Pages in PDF File: 59

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Date posted: March 1, 2010 ; Last revised: June 20, 2013

Suggested Citation

Bandiera, Oriana and Guiso, Luigi and Prat, Andrea and Sadun, Raffaella, Matching Firms, Managers, and Incentives (August 3, 2011). Journal of Labor Economics, Forthcoming; Harvard Business School Strategy Unit Working Paper No. 10-073. Available at SSRN: http://ssrn.com/abstract=1561903 or http://dx.doi.org/10.2139/ssrn.1561903

Contact Information

Oriana Bandiera
London School of Economics & Political Science (LSE) - Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD) ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7519 (Phone)
+44 20 7055 6951 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Luigi Guiso
European University Institute ( email )
Villa Schifanoia
133 via Bocaccio
Firenze (Florence), 50014
Italy
Andrea Prat
London School of Economics (LSE) - Department of Economics ( email )
Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6992 (Phone)
+44 20 7955 6951 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Raffaella Sadun (Contact Author)
Harvard University - Strategy Unit ( email )
Harvard Business School
Soldiers Field Road
Boston, 02163
United States
HOME PAGE: http://people.hbs.edu/rsadun
London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )
Houghton Street
London WC2A 2AE
United Kingdom
HOME PAGE: http://cep.lse.ac.uk/_new/staff/person.asp?id=1758
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References:  732
Citations:  16
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