nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2013‒11‒09
twelve papers chosen by
Tommaso Reggiani
University of Cologne

  1. Firm-Specific Human Capital, Organizational Incentives, and Agency Costs: Evidence from Retail Banking By Frank Jr. , Douglas H.; Obloj , Tomasz
  2. Compensation Discrimination in the NFL: An Analysis of Career Earnings By Johnny Ducking; Peter A. Groothuis; James Richard Hill
  3. Who works for startups? The relation between firm age, employee age, and growth By Paige Ouimet; Rebecca Zarutskie
  4. Trust and management: Explaining cross-national differences in work autonomy By Hoorn, André van
  5. How market access shapes human capital investment in a peripheral country By Anna Matas; Josep Lluís Raymond; José Luis Roig
  6. Corporate Governance and Corporate Social Performance By Kurt A. Desender; Mircea Epure
  7. Relative Performance Concerns, Attention Allocation and Complementarities in Information Acquisition By Niu, Zilong
  8. Trust and Manipulation in Social Networks By Manuel Förster; Ana Mauleon; Vincent Vannetelbosch
  9. Elected vs appointed public law enforcers By Éric Langlais; Marie Obidzinski
  10. Routines during an organizational change: a study on dynamics and its effects By Paul Peigné
  11. CEO Option Compensation, Risk-Taking Incentives, and Systemic Risk in the Banking Industry By Jeong-Bon Kim; Li Li; Mary L. Z. Ma; Frank M. Song Author-Workplace-Name: University of Hong Kong
  12. Analyzing Zero Returns to Education in Germany: Heterogeneous Effects and Skill Formation By Daniel A. Kamhöfer; Hendrik Schmitz

  1. By: Frank Jr. , Douglas H.; Obloj , Tomasz
    Abstract: This paper explores conflicting implications of firm-specific human capital (FSHC) for firm performance. Existing theory predicts a productivity effect that can be enhanced with strong incentives. We propose an offsetting agency effect: FSHC may facilitate more sophisticated “gaming” of incentives, to the detriment of firm performance. Using a unique dataset from a multiunit retail bank, we document both effects and estimate their net impact. Managers with superior FSHC are more productive in selling loans but are also more likely to manipulate loan terms to increase incentive payouts. We find that resulting profits are two percentage points lower for high-FSHC managers. Finally, profit losses increase more rapidly for high-FSHC managers, indicating adverse learning. Our results suggest that FSHC can create agency costs that outweigh its productive benefits.
    Keywords: FSHC; firm-specific human capital; firm performance; incentives; multiunit retail bank
    JEL: G00
    Date: 2013–05–16
  2. By: Johnny Ducking; Peter A. Groothuis; James Richard Hill
    Abstract: Using NFL data from 2000 to 2008, we test for compensation discrimination on career earnings in the NFL. We use both the traditional dummy variable technique applied to Ordinary Least Squares regression as well as quantile regression analysis to measures the effect of race on earnings. We focus on six positional groups: defensive backs, defensive linemen, linebackers, running backs, tight ends and wide receivers. Our analysis finds that a player’s performance determines career earnings and not their race. Perhaps, using a Becker-like argument, market competition for the best players in a competitive environment to achieve a winning team has overcome personal prejudice. Key Words: economics
    Date: 2013
  3. By: Paige Ouimet; Rebecca Zarutskie
    Abstract: Young firms disproportionately employ young workers, controlling for firm size, industry, geography and time. The same positive correlation between young firms and young employees holds when we look just at new hires. On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. These facts are consistent with the argument that the skills, risk tolerance, and career dynamics of young workers are contributing factors to their disproportionate share of employment in young firms. Finally, we show that an increase in the regional supply of young workers is positively related to the rate of new firm creation, especially in high tech industries, suggesting a causal link between the supply of young workers and new firm creation.
    Date: 2013
  4. By: Hoorn, André van (Groningen University)
    Abstract: We open the black box of what goes on in firms in terms of management of their operations. Work autonomy is a key aspect of firm organization and we test the hypothesis that societal trust affects the level of autonomy that firms grant to their employees. Analysis of up to 189,213 individuals from 30 countries shows that trust is indeed highly conducive to work autonomy. This result is robust to controlling for a wide range of other features of countries? institutional environment, including measures of labor regulations and institutional quality. Our findings highlight the importance of informal institutions such as societal trust in shaping economic activity.
    Date: 2013
  5. By: Anna Matas (Dpt. Economia Aplicada, Universitat Autònoma de Barcelona and Institut d’Economia de Barcelona (IEB)); Josep Lluís Raymond (Dpt. Economia Aplicada, Universitat Autònoma de Barcelona and Institut d’Economia de Barcelona (IEB)); José Luis Roig (Dpt. Economia Aplicada, Universitat Autònoma de Barcelona, Barcelona, Spain.)
    Abstract: Human capital endowment is one of the main factors influencing the level of development of a region. This paper analyses whether remoteness from economic activity has a negative effect on human capital accumulation and, consequently, on economic development. Making use of microdata this research proves that remoteness from economic activity has contributed to explain the divergences in the level of education observed across Spanish provinces over the last 50 years. The effect is significant even when controlling for the improvement of education supply. Nonetheless, the accessibility effect has been petering out since the 1960s due to the decreasing barriers to mobility.
    Keywords: Regional development, human capital, market access
    JEL: O10 R11 R40
    Date: 2013–10
  6. By: Kurt A. Desender; Mircea Epure
    Abstract: By integrating the agency and stakeholder perspectives, this study aims to provide a systematic understanding of the firm- and institutional-level corporate governance factors that affect corporate social performance (CSP). We analyze a large global panel dataset and reveal that CSP is positively associated with board independence, but negatively with ownership concentration. These results underscore the idea that the benefits of CSP do not flow to shareholders to the same extent as the costs and that the allocation of resources to CSP is lower when shareholders are powerful. Furthermore, these findings indicate that independent directors should be understood as agents in their own right, not only focused on defending shareholder interests. We also find that CSP is negatively related to investor protection and shareholder-oriented environments, while it is positively related to egalitarian environments. Finally, we jointly analyze firm-level drivers and institutional contexts.
    Keywords: corporate social performance, corporate governance, agency theory, stakeholder theory
    JEL: A13 G3 M0 M1 M14 M4 M41
    Date: 2013–10
  7. By: Niu, Zilong
    Abstract: This article studies how relative performance concerns affect institutional investors' information choices in the context of a multi-security market. I show that due to relative performance concerns and learning capacity constraint, institutional investors tend to acquire the same piece of information and the same asset as their peers. I also show that the change of distribution of capacity constraint can affect the price efficiency and cost of capital, but only through its effect on investors' average capacity constraint.
    Keywords: relative performance concerns, attention allocation, complementarities in information acquisition
    JEL: D82 G14 G23
    Date: 2013–09–04
  8. By: Manuel Förster (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique); Ana Mauleon (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CEREC - Université Saint-Louis - Bruxelles); Vincent Vannetelbosch (CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain (UCL) - Belgique, CEREC - Université Saint-Louis - Bruxelles)
    Abstract: We investigate the role of manipulation in a model of opinion formation where agents have opinions about some common question of interest. Agents repeatedly communicate with their neighbors in the social network, can exert some effort to manipulate the trust of others, and update their opinions taking weighted averages of neighbors' opinions. The incentives to manipulate are given by the agents' preferences. We show that manipulation can modify the trust structure and lead to a connected society, and thus, make the society reaching a consensus. Manipulation fosters opinion leadership, but the manipulated agent may even gain influence on the long-run opinions. In sufficiently homophilic societies, manipulation accelerates (slows down) convergence if it decreases (increases) homophily. Finally, we investigate the tension between information aggregation and spread of misinformation. We find that if the ability of the manipulating agent is weak and the agents underselling (overselling) their information gain (lose) overall influence, then manipulation reduces misinformation and agents converge jointly to more accurate opinions about some underlying true state.
    Keywords: Social networks; trust; manipulation; opinion leadership; consensus; wisdom of crowds
    Date: 2013–09
  9. By: Éric Langlais; Marie Obidzinski
    Abstract: This paper revisits the issue of law enforcement and the design of monetary sanctions when the public law enforcer's incentives depart from those of a benevolent authority, which is the most frequent assumption made in the literature on crime deterrence. We …rst consider the case of an elected enforcer. We …nd that when the harm generated by offenses is quite small relative to the average private bene…ts, equilibrium with weak enforcement/low sanction prevails. Instead, when the harm generated by offenses is high relative to the average private bene…ts, it is the equilibrium with strong enforcement/high sanctions that prevails. Therefore, we provide an explanation for the empirical puzzle highlighted by Lin(2007): elected enforcers punish major (minor) crimes more (less) severely than the benevolent social planer. The case of an appointed enforcer prone to rent seeking is also considered. The monetary sanction under rent seeking is closer to the utilitarian level, as compared with the one under election.
    Keywords: law enforcement, deterrence, monetary sanctions, punishment, electoral competition, democracy, rent seeking, dictature
    JEL: D72 D73 H1 K14 K23 K4
    Date: 2013
  10. By: Paul Peigné (GRANEM - Groupe de Recherche Angevin en Economie et Management - Université d'Angers)
    Abstract: In their quest for deeper insight into organizations, for some years now a great deal of researchers have focused on the concept of routines. Routines enable researchers to make out some of the dynamics which govern the organization, by fostering stability or , on the contrary, favoring development and change. The present paper proposes a case study which will enable us to portray two sets of routines whose dynamic and effects prove worthy of consideration. In fact, an exogenous event compels an organization to change its aims and its habits. This change triggers a break in the albeit proven set of routines within the organization. Those of the executive managers adapt themselves to new objectives without adopting the mindset, whereas most operatives become the symbol of resistance to change so plunging themselves into uncertainty, jeopardizing their identity and the meaning of their everyday situation. By means of this case, we underline how desires for openness, exchange and dialogue meant to nurture the conditions of change get bogged down, sabotaged and become useless in the daily interplay of force and opposition that the project itself engenders. Finally we will underline how this dynamic also produces effects as much upon the individuals exposed to the paradoxes that it induces as upon the organization whose coherence and integrity is gradually being whittled away.
    Keywords: Organizational dynamics; organizational change; evolutionary economics; routines, job stress.
    Date: 2013–06
  11. By: Jeong-Bon Kim (City University of Hong Kong); Li Li (University of International Business and Economics and Hong Kong Institute for Monetary Research); Mary L. Z. Ma (York University); Frank M. Song Author-Workplace-Name: University of Hong Kong
    Abstract: This study predicts and finds that chief executive officer (CEO) risk-taking incentives induced by stock option compensation increase a bank's contribution to systemic distress risk and systemic crash risk. We also predict and find that this CEO incentive systemic risk relation operates through three channels (i) a bank's engagement in non-interest income-generating activities, (ii) investments in innovative financial products such as collateralized debt obligations and credit default swaps, and (iii) maturity mismatch associated with on short-term debt financing. Finally, the CEO incentive-systemic risk relation is moderated by information transparency, bank size, market liquidity, and financial crisis. We also discuss relevant policy implications.
    JEL: G01 G21 G32
    Date: 2013–10
  12. By: Daniel A. Kamhöfer; Hendrik Schmitz
    Abstract: We analyze the effect of education on wages using German Socio-Economic Panel data and regional variation in mandatory years of schooling and the supply of schools. This allows us to estimate more than one local average treatment effect and heterogeneous effects for different groups of compliers. Our results are in line with previous studies that do not find an effect of compulsory schooling on wages in Germany. We go beyond these studies and test a potential reason for it, namely that basic skills are learned earlier in Germany and additional years of schooling are not effective anymore. This is done by also estimating the effect of education on cognitive skills. The results suggest that education after the eighth year does not seem to have a causal effect on cognitive skills in Germany. This is consistent with the explanation for zero effects of schooling on earnings.
    Keywords: Returns to education, Skills, IV estimation
    JEL: I21 J24 C26
    Date: 2013

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