Managers, Incentives and Corporate Performance: Evidence from the Czech Republic

24 Pages Posted: 14 Nov 1997

See all articles by Stijn Claessens

Stijn Claessens

Bank for International Settlements (BIS)

Simeon Djankov

London School of Economics & Political Science (LSE); Peter G. Peterson Institute for International Economics

Date Written: November 1997

Abstract

We study the effect of changes in management and the use of equity incentives on firm performance and market valuation using a cross-section of 706 Czech firms over the 1993-97 period. As these firms have exogenously determined ownership structures, we avoid the simultaneity problem often present in studies for transition economies where either existing managers become owners or new owners replace existing managers. And, as there were few managers in the Czech Republic with market-economy skills, we avoid the selection problem often present in studies for market economies where new managers may be better suited than existing managers to manage the firm. Controlling also for initial conditions and sector-specific effects, we find that several measures of enterprise performance are positively related with the entry of new managers, particularly if those managers were selected by private owners (rather than by the government). Equity holdings by managers appear to have no effect on corporate performance. The results suggest that changes in human capital are more important in bringing about improvements in corporate performance than equity incentives.

JEL Classification: G32

Suggested Citation

Claessens, Stijn and Djankov, Simeon, Managers, Incentives and Corporate Performance: Evidence from the Czech Republic (November 1997). Available at SSRN: https://ssrn.com/abstract=45774 or http://dx.doi.org/10.2139/ssrn.45774

Stijn Claessens

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Simeon Djankov (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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