Matching firms, managers, and incentives
By: Oriana Bandiera, Luigi Guiso, Andrea Prat, Raffaella Sadun
Contributors: Guiso, Luigi; Prat, Andrea; Sadun, Raffaella; Harvard Business School
Edition: Rev.
Series: Working paper / Harvard Business School -- 10-073; Working paper (Harvard Business School) -- 10-073
Publisher: Harvard Business School
Published: 2011
Place of publication: Boston]
Language: eng
Number of pages: 47
Description: 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.
Notes: "March 2010, revised August 2011" -- Publisher's website.

"December 10, 2010, August 3, 2011" -- added t.p.

Includes bibliographical references.