nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2017‒09‒17
six papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Average Pay in Banks: Do Agency Problems and Bank Performance Matter? By Harkin, Sean M.; Mare, Davide S.; Crook, Jonathan N.
  2. Performance-induced CEO turnover By Jenter, Dirk; Lewellen, Katharina A.
  3. Loss Aversion and the Quantity-Quality Tradeoff By Jared Rubin; Anya Samek; Roman M. Sheremeta
  4. How Stress Affects Performance and Competitiveness across Gender By Jana Cahlikova; Lubomir Cingl; Ian Levely
  5. Strategic Feedback in Teams: Theory and Experimental Evidence By Seda Ertac; Mert Gumren; Levent Kockesen
  6. Teamwork as a Self-Disciplining Device By Matthias Fahn; Hendrik Hakenes

  1. By: Harkin, Sean M.; Mare, Davide S.; Crook, Jonathan N.
    Abstract: We study the determinants of average pay across all levels of staff seniority for UK banks between 2003 and 2012. We show that pay is affected by agency problems but not by bank operating performance. Average pay does not depend on accounting outcomes at the bank level. By contrast, average pay is positively affected by the presence of a Remuneration Committee and the proportion of Non-Executives on the Board. These findings indicate that bank pay is determined by agency issues, not bank accounting performance. Our results have practical implications for bank shareholders and regulators, suggesting the need for greater transparency in governance of bank pay.
    Keywords: Corporate Governance, Remuneration, Bank Performance, Agency Problems.
    JEL: G21 G34 G35 M52
    Date: 2017–09–01
  2. By: Jenter, Dirk; Lewellen, Katharina A.
    Abstract: This paper revisits the relationship between firm performance and CEO turnover. We drop the distinction between forced and voluntary turnovers and introduce the concept of performance-induced turnover, defined as turnover that would not have occurred had performance been "good". We document a close link between performance and CEO turnover and estimate that between 38% and 55% of all turnovers are performance induced, with an even higher percentage early in tenure. This is significantly more than the number of forced turnovers identified in prior studies. We contrast the empirical properties of performance-induced turnovers with the predictions of Bayesian learning models of CEO turnover. Learning by boards about CEO ability appears to be slow, and boards act as if CEO ability (or match quality) was subject to frequent and sizeable shocks.
    Keywords: CEO turnover; CEO-firm matching; corporate governance; turnover-performance relationship
    JEL: D22 D23 G34 J63 M12 M51
    Date: 2017–09
  3. By: Jared Rubin (Argyros School of Business and Economics, Chapman University); Anya Samek (Dornsife College of Letters, Arts and Sciences, University of Southern California); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University)
    Abstract: Firms face an optimization problem that requires a maximal quantity output given a quality constraint. But how do firms incentivize quantity and quality to meet these dual goals, and what role do behavioral factors, such as loss aversion, play in the tradeoffs workers face? We address these questions with a theoretical model and an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with basic economic theory, higher quality incentives encourage participants to shift their attention from quantity to quality. However, we also find that loss averse participantsshift their attention from quality to quantity to a greater degree when quality is weakly incentivized. These results can inform managers of appropriate ways to structure contracts, and suggest benefits to personalizing contracts based on individual behavioral characteristics.
    Keywords: quantity, quality, experiment, incentives, real effort, loss aversion
    JEL: D24 J24 J31 J41
    Date: 2017
  4. By: Jana Cahlikova; Lubomir Cingl; Ian Levely
    Abstract: Since many key career events, such as exams and interviews, involve competition and stress, gender differences in response to these factors could help to explain the labor-market gender gap. In a laboratory experiment, we manipulate psychosocial stress using the Trier Social Stress Test, and confirm that this is effective by measuring salivary cortisol. Subjects perform a real-effort task under both tournament and piece-rate incentives and we elicit willingness to compete. We find that women under heightened stress do worse than women in the control group when compensated with tournament incentives, while there is no treatment difference for performance under piece-rate incentives. For males, stress does not affect output under competition. We also find that stress decreases willingness to compete overall, and for women, this is related to performance. These results help to explain previous findings on gender differences in performance under competition both in and out of the lab.
    Keywords: competitiveness; performance in tournaments; psychosocial stress; gender gap;
    JEL: C91 D03 J16 J33
    Date: 2017–05
  5. By: Seda Ertac (Department of Economics, Koç University); Mert Gumren (Department of Economics, Koç University); Levent Kockesen (Department of Economics, Koç University)
    Abstract: We theoretically and experimentally analyze public and private feedback in teams that are characterized by different performance technologies. We consider a setting where the principal can provide truthful information on agents’ performances or strategically withhold feedback. We find that if team performance is determined by the best performer (the “best-shot technology”), then both public and private feedback are better than no feedback unless the team is composed of all low performers, in which case no feedback is best. If, on the other hand, team performance is determined by the worst performer (the weakest-link technology), then no feedback is the best regime unless the team is composed of all high performers, in which case public or private feedback is better. Our results have implications for performance feedback policies in educational settings and the workplace.
    Keywords: Lab experiments, Feedback, Performance feedback, Teams, Strategic communication, Disclosure games, Multiple audiences.
    JEL: C72 C92 D23 D82 D83 M12 M54
    Date: 2017–09
  6. By: Matthias Fahn (Department of Economics, Johannes Kepler University Linz, Austria); Hendrik Hakenes
    Abstract: We show that team formation can serve as an implicit commitment device to overcome problems of self-control. If individuals have present-biased preferences, effort that is costly today but rewarded at some later point in time is too low from the perspective of an individual’s long-run self. If agents interact repeatedly and can monitor each other, a relational contract involving teamwork can help to improve performance. The mutual promise to work harder is credible because the team breaks up after an agent has not kept this promise – which leads to individual underproduction in the future and hence a reduction of future utility.
    Keywords: Self-Control Problems, Teamwork, Relational Contracts.
    JEL: L22 L23
    Date: 2017–07

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