Does Mentor's Ability Matter for Compensation?

39 Pages Posted: 10 Jun 2013 Last revised: 19 Sep 2014

See all articles by Georgios Farfaras

Georgios Farfaras

John Molson School of Business, Concordia University

Ivan Stetsyuk

University of Quebec at Montreal (UQAM) - Faculty of Management (ESG)

Date Written: September 16, 2014

Abstract

We use an agency model with moral hazard and adverse selection to study the effect of a mentor's ability on the compensation of his mentees. An agent who is trained by a mentor of higher ability receives valuable experience that increases not only his productivity but also his output sensitivity to effort. In our model's equilibrium, the greater productivity translates into higher total compensation, and the greater output sensitivity of effort leads to stronger incentives. We test these predictions by using data from college football coaches and we find strong empirical support for our hypotheses. Football coaches who have previously worked as assistants to head coaches of superior ability, are on average more productive. We find that, 1% increase in mentor's performance (our proxy for mentor's ability) increases head coach's total compensation by $7,800. Finally, head coaches who had better mentors received on average stronger incentives in the form of bonus payments, a result which is consistent with our model's predictions.

Keywords: Executive compensation, agency models, mentoring, football coaches

JEL Classification: D82, D86, J33

Suggested Citation

Farfaras, Georgios and Stetsyuk, Ivan, Does Mentor's Ability Matter for Compensation? (September 16, 2014). Available at SSRN: https://ssrn.com/abstract=2276746 or http://dx.doi.org/10.2139/ssrn.2276746

Georgios Farfaras

John Molson School of Business, Concordia University ( email )

Montreal, Quebec H3G1M8
Canada

Ivan Stetsyuk (Contact Author)

University of Quebec at Montreal (UQAM) - Faculty of Management (ESG) ( email )

315 St. Catherine Street East
R-2360
Montreal, Quebec H2X 3X2
Canada

Register to save articles to
your library

Register

Paper statistics

Downloads
72
Abstract Views
611
rank
329,346
PlumX Metrics