Managerial Horizon and Corporate Labor Policies: Evidence from Fixed-Term Boards

59 Pages Posted: 21 Nov 2022

See all articles by Sabrina Lucia Di Addario

Sabrina Lucia Di Addario

Bank of Italy

Vincenzo Pezone

Tilburg University - Department of Finance

Raffaele Saggio

University of British Columbia (UBC)

Multiple version iconThere are 2 versions of this paper

Date Written: November 11, 2022

Abstract

We examine the relationship between managerial incentives and firms' human resource policies by combining Italian social security records with newly collected data on board terms. We exploit the fact that boards of listed companies are appointed every three years as a source of variation in directors and top executives' horizon. Our evidence shows that average wages cyclically decline in the last year of the board term, as managers approach the end of their tenure, consistent with executives trying to cut labor expenses and, hence, maximize profitability when they are up for reappointment. By leveraging individual administrative data, we also show that involuntary separations that occur close to the end of a board term lead to significantly worse outcomes for workers compared to involuntary separations that occur at the beginning of a board term; this result is driven by outsourcing events. These effects are not present in firms where managers are more likely to be entrenched, such as family-managed firms.

Keywords: Labor and Finance, Board terms, Family Firms

JEL Classification: G3, J3, J53, M12

Suggested Citation

Di Addario, Sabrina Lucia and Pezone, Vincenzo and Saggio, Raffaele, Managerial Horizon and Corporate Labor Policies: Evidence from Fixed-Term Boards (November 11, 2022). Available at SSRN: https://ssrn.com/abstract=4274981 or http://dx.doi.org/10.2139/ssrn.4274981

Sabrina Lucia Di Addario

Bank of Italy ( email )

Via 20 settembre, 97/e
00187 Rome, I - 00184
Italy
+39 06 4792 3458 (Phone)
+39 06 4792 5626 (Fax)

HOME PAGE: http://sites.google.com/site/sabrinadiaddario/

Vincenzo Pezone (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Raffaele Saggio

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

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