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on Human Capital and Human Resource Management |
| By: | Larcker, David F. (Graduate School of Business and Rock Center for Corporate Governance, Stanford University); McClure, Charles (Booth School of Business, University of Chicago); Zhu, Christina (The Wharton School, University of Pennsylvania) |
| Abstract: | We examine the selection of peer groups that boards of directors use when setting the level of CEO compensation. This choice is controversial because it is difficult to ascertain whether peer groups are selected to (i) attract and retain top executive talent or (ii) enable rent extraction by inappropriately increasing CEO compensation. In contrast to prior research, our analysis utilizes the degree to which the observed compensation level of peers in the portfolio is unusual relative to all potential portfolios of peers the board of directors could have reasonably selected. Using a sample of 10,235 firm-year observations from 2008 to 2014, we estimate roughly 33% of board of directors’ choices appear to be associated with rent extraction, whereas the remaining 67% are associated with attracting and retaining high-quality CEO talent. Relative to firms that appear to select peers for aspirational labor market reasons, we find rent extraction firms have more structural governance concerns and realized negative governance outcomes. Over our sample period, we estimate the aggregate excess pay for rent extraction firms is approximately $5.4 billion, or 38% of their total pay. |
| JEL: | G30 J33 M12 M52 |
| Date: | 2019–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3767&r=all |
| By: | Emery, Cécile; Booth, Jonathan E.; Michaelides, George; Swaab, Alexander J. |
| Abstract: | Although differentiated relationships among leaders and their followers are fundamental to Leader–Member Exchange (LMX) theory, research provides limited knowledge about whether employees’ responses to individual perceptions of LMX differentiation are uniform. In a field study, we examined whether individual-level psychological empowerment buffers the negative relationship between perceived LMX differentiation and job satisfaction and found that the negative relationship is strongest under low employee psychological empowerment conditions, as compared to high psychological empowerment. Furthermore, in a multi-wave field study and an experiment, we extended these initial findings by investigating employees’ perceptions of supervisory fairness as a mediator of this moderated relationship. We found that the indirect effect between perceived LMX differentiation and job satisfaction, through supervisory fairness perceptions, is strongest under low employee psychological empowerment, as compared to high psychological empowerment. Collectively, our findings showcase the importance of psychological empowerment as a tool for employees to use to counteract the negative effect of perceived differentiated contexts. Practitioner points: When employees perceive that their managers have differentiated relationships across workgroup employees, employees tend to be less satisfied in their jobs, and this negative relationship is explained through employees’ perceptions of supervisory fairness. Employees with low psychological empowerment levels (e.g., employees who feel less in control of their work) report lower levels of job satisfaction when they perceive that their managers differentiate among employees. However, employees with high levels of psychological empowerment are more resilient in contexts where managers are perceived to differentiate across workgroup employees. The findings reinforce the necessity for managers and organizations to implement and promote empowerment initiatives. |
| Keywords: | perceived LMX differentiation; psychological empowerment; supervisory fairness |
| JEL: | J50 |
| Date: | 2019–04–05 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:100433&r=all |
| By: | Richard Blundell (University College London and Institute for Fiscal Studies); Monica Costa Dias (Institute for Fiscal Studies and University of Porto); David Goll (University College London and Institute for Fiscal Studies); Costas Meghir (Cowles Foundation, Yale University, NBER, IZA, CEPR, and Institute for Fiscal Studies) |
| Abstract: | We investigate the role of training in reducing the gender wage gap using the UK- BHPS which contains detailed records of training. Using policy changes over an 18 year period we identify the impact of training and work experience on wages, earnings and employment. Based on a lifecycle model and using reforms as a source of exogenous variation we evaluate the role of formal training and experience in defining the evolution of wages and employment careers, conditional on education. Training is potentially important in compensating for the effects of children, especially for women who left education after completing high school. |
| Keywords: | Workplace training, On the job training, Female labor supply, Gender wage differentials, Human capital, Fertility and the gender wage gap, Lifecycle labor supply |
| JEL: | E24 H24 I28 J16 J22 J24 J31 J71 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2174&r=all |
| By: | Analia Schlosser; Zvika Neeman; Yigal Attali |
| Abstract: | We study how different demographic groups respond to incentives by comparing their performance in “high” and “low” stakes situations. The high stakes situation is the GRE examination and the low stakes situation is a voluntary experimental section of the GRE. We find that Males exhibit a larger drop in performance between the high and low stakes examinations than females, and Whites exhibit a larger drop in performance compared to minorities. Differences between high and low stakes tests are partly explained by the fact that males and whites exert lower effort in low stakes tests compared to females and minorities. |
| Keywords: | high stakes, low stakes, GRE, incentives, experiment, performance, gender gap, race gap |
| JEL: | C93 I23 I24 J15 J16 J24 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7590&r=all |
| By: | Choi, Jung Ho (Stanford University Graduate School of Business); Gipper, Brandon (Stanford University Graduate School of Business) |
| Abstract: | We examine employment effects, such as wages and employee turnover, before, during, and after periods of fraudulent financial reporting. To analyze these effects, we combine U.S. Census data with SEC enforcement actions against firms with serious misreporting (“fraud†). We find compared to a matched sample that fraud firms’ employee wages decline by 9% and the separation rate is higher by 12% during and after fraud periods while employment growth at fraud firms is positive during fraud periods and negative afterward. We discuss several reasons that plausibly drive these findings. (i) Frauds cause informational opacity, misleading employees to still join or continue to work at the firm. (ii) During fraud, managers overinvest in labor changing employee mix, and after fraud the overemployment is unwound causing effects from displacement. (iii) Fraud is misconduct; association with misconduct can affect workers in the labor market. We explore the heterogeneous effects of fraudulent financial reporting, including thin and thick labor markets, bankruptcy and non-bankruptcy firms, worker movements, pre-fraud wage levels, and period of hire. Negative wage effects are prevalent across these sample cuts, indicating that fraudulent financial reporting appears to create meaningful and negative consequences for employees possibly through channels such as labor market disruptions, punishment, and stigma. |
| JEL: | D83 J23 J31 M48 M51 |
| Date: | 2019–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3771&r=all |
| By: | Francisco Queiró (Nova School of Business and Economics) |
| Abstract: | This paper shows that entrepreneurial human capital is a key driver of firm dynamics using administrative panel data on the universe of firms and workers in Portugal. Firms started by more educated entrepreneurs are larger at entry and exhibit higher growth throughout the life cycle. The differences are driven by productivity, are particularly strong in the upper tail of the distribution, and do not hold for more educated workers in general. In addition, they do not appear to be driven by omitted ability or selection. Combining these findings with cross-country data to calibrate a simple model of heterogeneous firms, I find that accounting for the effect of entrepreneurial human capital on firm-level productivity increases the fraction of cross-country income differences explained by human and physical capital from 40% to 65%-76%. |
| Keywords: | Entrepreneurship; Human Capital; Firm Dynamics; Productivity |
| JEL: | I2 L2 O4 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0116&r=all |
| By: | Dudley Cooke (University of Exeter); Ana P. Fernandes (University of Exeter); Priscila Ferreira (University of Minho, NIMA) |
| Abstract: | This paper presents novel empirical evidence for the prediction from Becker’s (1957) famous theory, that competition will drive discrimination out of the market. We use a comprehensive firm entry deregulation reform in Portugal as a quasi-natural experiment to study the effect of increased product market competition on gender discrimination. We use employer-employee data for the universe of private sector firms and workers, and exploit the staggered implementation of the reform across municipalities for identification. Increased competition following the deregulation reduces the gender pay gap for medium- and high-skill workers but not for the low-skilled. The gender pay gap is also reduced for workers in managerial positions, except for the CEO. We also find that the share of females in managerial positions increased in affected municipalities. Existing evidence has shown that gender discrimination reduces output; our findings suggest that deregulation can contribute to reduce inefficiencies arising from gender discrimination. |
| Keywords: | Deregulation, Discrimination, Entry, Gender Pay Gap, Product Market Competition, Wage Structure. |
| JEL: | J16 J31 J71 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0105&r=all |
| By: | Jinks, Lu (University of Illinois at Chicago); Kniesner, Thomas J. (Claremont Graduate University); Leeth, John D. (Bentley University); Lo Sasso, Anthony T. (University of Illinois at Chicago) |
| Abstract: | Texas is the only state that does not mandate that employers carry workers' compensation insurance (WC) coverage. We employ a quasi-experimental design paired with a novel machine learning approach to examine the effects of switching from traditional workers' compensation to a so-called non-subscription program in Texas. Specifically, we compare before and after effects of switching to non-subscription for employees in Texas to contemporaneously measured before and after differences for non-Texas-based employees. Importantly, we study large self-insured companies operating the same business in multiple states in the US; hence the non-Texas operations represent the control sites for the Texas treatment sites. The resulting difference-in-differences estimation technique allows us to control for any companywide factors that might be confounded with switching to non-subscription. Our empirical approach also controls for injury characteristics, employment characteristics, industry, and individual characteristics such as gender, age, number of dependents, and marital status. Outcomes include number of claims reported, medical expenditures, indemnity payments, time to return to work, likelihood of having permanent disability, likelihood of claim denial, and likelihood of litigation. The data include 25 switcher companies between the years 2004 and 2016, yielding 846,376 injury incidents. Regression findings suggest that indemnity, medical payments, and work-loss fall substantially. Claim denials increase and litigation falls. |
| Keywords: | workers' compensation insurance, non-subscription, difference-in-differences, triple differences, machine learning, PDS-LASSO |
| JEL: | C54 I13 J32 J38 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12290&r=all |
| By: | Rahul Deb; Mallesh M. Pai; Maher Said |
| Abstract: | We develop a dynamic adverse selection model where a career-concerned buy-side analyst advises a fund manager about investment decisions. The analyst's ability is privately known, as is any information she learns over time. The manager wants to elicit information to maximize fund performance while also identifying and retaining high-skill analysts. We characterize the optimal dynamic contract, show that it has several features supported by empirical evidence, and derive novel testable implications. The fund manager's optimal contract both maximizes the value of information and screens out low-skill analysts by incentivizing the analyst to always provide honest advice. |
| Keywords: | buy-side analysts, career concerns, analyst recommendations, forecasting, dynamic mechanism design |
| JEL: | D82 D83 D86 G11 G14 G23 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ste:nystbu:19-01&r=all |
| By: | Ondřej Krčál (Masaryk University); Rostislav Staněk (Masaryk University); Martin Slanicay (Masaryk University) |
| Abstract: | A large body of evidence supports a negative association between risk aversion of workers and the level of risk they face in their occupations. This relationship could be explained by the self-selection of workers into jobs according to their risk preferences or by the effect on risk attitudes of occupations in which people face or witness dangerous situations. We use incentivized experiments to measure risk preferences among three different groups: experienced firefighters, novice firefighters, and students. We find that experienced firefighters are less risk-averse than novice firefighters, and these in turn are less risk-averse than students. The effects remain significant even after controlling for other relevant differences between these groups. Our findings suggest that the observed relationship between risk aversion and high-risk occupations is not only a result of self-selection but also of people’s preferences being shaped by their work lives. |
| Keywords: | risk preferences, high-risk occupations, self-selection, lab-in-the-field experiment |
| Date: | 2019–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:mub:wpaper:2019-05&r=all |