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on Human Capital and Human Resource Management |
| By: | Doligalski, Pawel; Ndiaye, Abdoulaye; Werquin, Nicolas |
| Abstract: | Half of the jobs in the U.S. feature pay-for-performance. We study nonlinear income taxation in a model where such contracts arise in private labor markets that are constrained by moral hazard frictions. We derive novel formulas for the incidence of arbitrarily nonlinear reforms of a given tax code on both the mean of earnings and their sensitivity to performance. We show theoretically and quantitatively that, following an increase in tax progressivity, the higher performance-sensitivity caused by the crowding-out of insurance provided by firms is almost fully offset by a countervailing "performance-pay effect" driven by labor supply responses. As a result, earnings risk is hardly affected by policy. We then turn to the normative analysis of a government that levies taxes and transfers to redistribute income across workers with different levels of uninsurable productivity. We find that setting taxes without accounting for the endogeneity of private insurance is close to optimal. Thus, the common concern that standard models of taxation underestimate the cost of redistribution is, in the context of performance-based compensation, overblown. |
| Keywords: | moral hazard; optimal taxation; Performance pay; Tax Incidence |
| JEL: | D61 D82 D86 H21 H22 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14648&r=all |
| By: | Gamal Atallah (Department of Economics, University of Ottawa, Ottawa, ON); Claudia De Fuentes (Department of Management, Sobey School of Business, Saint Mary’s University); Christine A. Panasian (Department of Finance, Information Systems and Management Science, Sobey School of Business, Saint Mary’s University) |
| Abstract: | Using a large sample of North American firms, from 1999 to 2016, we investigate the effect of corporate governance structures, specifically ownership, board characteristics, and executive compensation contracts on innovation intensity and output. We consider both R&D expenditures and patents as innovation proxies and evaluate consequences of the economic downturns of 2000 and 2008. We find that R&D investment increases with ownership by institutional blockholders and with the number of institutional owners, confirming the key role institutions play in innovation activities of firms. We observe higher R&D levels for firms with more independent boards, more females board members and more outside directorships held by directors. We report that firms with CEO/chair of the board duality have lower R&D intensity, as do firms with higher ownership by directors and with a higher mean board age. Innovation is negatively related to CEO salary levels, but positively related to the ratio of incentives to total compensation, confirming that incentives contribute to aligning shareholders and management interests, which leads to better long-term decisions. However, those incentives reduce the number of patents. We do not find any systematic changes in R&D for the 2000 recession, however there is an increase for the 2008 financial crisis. |
| Keywords: | Corporate Governance, Corporate Finance and Governance, Innovation, R&D investment, Canada, United States. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:2001e&r=all |
| By: | Quey-Jen Yeh (Department of Business Administration, National Cheng-Kung University) |
| Abstract: | Work ethics and social responsibility (WESR) concerns business ethics that go beyond the economic and legal responsibilities. Modernization often implies adapting to Western management practices that inspire existing business cultures moving toward innovative waves against traditionalism. The purpose of this paper is to inspect the co-existence of Chinese diligence tradition and Western innovative values such as conflict tolerance, and how this combined cultural values incorporates either the traditional power-distance or modern coaching style of management to facilitate employees learning about WESR practices in Chinese-managed firms in Taiwan. To demonstrate the promising benefit of WESR in human resource, the paper examines the influence of WESR as a mediator to effect further on employees? work performance efficacy. The findings support the hypotheses proposed. |
| Keywords: | Work ethics and social responsibility (WESR), Confucianism, diligence tradition, innovative values, organizational cultures, management style, power-distance, coaching, work performance efficacy |
| JEL: | D22 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:sek:ibmpro:10112220&r=all |
| By: | Nkiendem Felix (Université de Dschang); Douanla Jean (Université de Dschang); Innocent Essomme; Nchitu Asah (Université de Yaoundé II); Roland Gahmuti (Université de Yaoundé II) |
| Abstract: | The rise in managerial pay over the past decades has sparked an intense debate about the nature of pay setting process. Many theoretical and empirical findings have portrayed direct and opposing relations between managerial compensation and firm performance within enterprises in general and financial institutions in particular.Here, managerial compensation retained as endogenous variable is captured using base salary and bonuses while firm performance as exogenous variable is measured using return on equity (ROE) and firm size while board size, is capturedthrough ownership and tenure served as control variables. We used questionnaires administered to managers of the respective institutions alongside with their pay slips and report of financial statement. STATA 12.0 was used to carry out our statistical test and regression analysis. Our sample survey consisted of 10 microfinance establishmentsin Cameroon for the period of 2007-2012. The results obtained depicted a negative significant relationship between pay and ROE regarding micro-finance establishments. Firm size on its part portrayed a positive influence on managers' compensation in micro-finance establishments. We recommend that decision-making in microfinance establishments should be driving incentives to cap managerial compensation with firm performance. |
| Abstract: | L'augmentation des rémunérations des cadres au cours des dernières décennies a suscité un débat intense sur la nature du processus de fixation des rémunérations. De nombreux résultats théoriques et empiriques ont mis en évidence des relations directes et opposées entre la rémunération des cadres et la politique de rémunération des entreprises. Dans ce cas, la rémunération des dirigeants conservée en tant que rémunération de base est la variable endogène qui est cerner à l'aide du salaire de base et des primes, tandis que la performance de l'entreprise en tant que variable exogène est mesurée à l'aide du rendement sur les capitaux propres (ROE) et la taille de l'entreprise, tandis que la taille du conseil d'administration est prise en compte par la propriété et la durée du mandat qui servent de variables de contrôle. Nous avons utilisé des questionnaires administrés aux gestionnaires des institutions respectives, en même temps que leurs fiches de paie et leur rapport d'état financier. STATA 12.0 a été utilisé pour effectuer notre test statistique et notre analyse de régression. Notre enquête par sondage comprenait 10 questionnaires sur la microfinance au Cameroun pour la période 2007-2012. Les résultats obtenus font apparaître une relation négative significative entre la rémunération et les Resultats concernant les établissements de micro-finance. La taille de l'entreprise, quant à elle, a eu une influence positive sur la rémunération des dirigeants en les établissements de micro-finance. Nous recommandons que la prise de décision dans les établissements de microfinance soit un facteur d'incitation au plafonnement de la rémunération des cadres avec des performances fermes. |
| Keywords: | Performance,ROE and Firm Size,Managerial Compensation |
| Date: | 2018–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02558799&r=all |
| By: | Garrett, Daniel F |
| Abstract: | In the context of a canonical agency model, we study the payoff implications of introducing optimally structured incentives. We do so from the perspective of an analyst who does not know the agent's preferences for responding to incentives, but does know that the principal knows them. We provide, in particular, tight bounds on the principal's expected benefit from optimal incentive contracting across feasible values of the agent's expected rents. We thus show how economically relevant predictions can be made robustly given ignorance of a key primitive. |
| Keywords: | mechanism design; Procurement; robustness |
| JEL: | D82 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14725&r=all |
| By: | Eduardo Levy Yeyati |
| Abstract: | Using job transition data from Argentina’s Household Survey, we document the extent to which human capital is specific to occupations and activities. Based on workers’ propensity to move between occupations/industries, we build Occupation and Industry Spaces to illustrate job similarities, and we compute an occupation and industry similarity measures that, in turn, we use to explain wage transition dynamics. We show that our similarity measures influence positively post-transition wages. Inasmuch as wages capture a worker´s marginal productivity and this productivity reflects the degree to which a worker matches the job’s skill demand, our results indicate that a worker´s human capital is specific to both occupation and activity: closer occupations share similar skill demands and task composition (in other words, demand similar workers) and imply a smaller human capital loss in the event of a transition. |
| Keywords: | Skills and Human Capital |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cid:wpfacu:379&r=all |
| By: | Adhvaryu, Achyuta; Bassi, Vittorio; Nyshadham, Anant; Tamayo, Jorge |
| Abstract: | How do firms pair workers with managers, and which constraints affect the allocation of labor within the firm? We characterize the sorting pattern of managers to workers in a large readymade garment manufacturer in India, and then explore potential drivers of the observed allocation. Workers in this firm are organized into production lines, each supervised by a manager. We exploit the high degree of worker mobility across lines, together with worker-level productivity data, to estimate the sorting of workers to managers. We find negative assortative matching (NAM) -- that is, better managers tend to match with worse workers, and vice versa. This stands in contrast to our estimates of the production technology, which reveal that if the firm were to positively sort, productivity would increase by 1 to 4 percent across the six factories in our data. Coupling these findings with a survey of managers and with data on multinational brands and the orders they place, we document that NAM arises, at least in part, because the value of buyer relationships imposes minimum productivity constraints on each production line. Our results emphasize that suppliers to the global market, when they are beholden to a small set of powerful buyers, may be driven to allocate managerial skill to service these relationships, even at the expense of productivity. |
| Keywords: | assortative matching; Global Buyers; India; Management; productivity; Readymade Garments |
| JEL: | J24 L14 L23 M5 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14554&r=all |
| By: | Amore, Mario Daniele; Pelucco, Valerio; Quarato, Fabio |
| Abstract: | Prompted by the shakeup of Covid-19 on financial markets, scholars have begun to explore the corporate traits that can make firms more resilient to a pandemic. In this paper, we test how the involvement of families in ownership and governance positions influences the financial performance of Italian listed firms during the spread of Covid-19. Our results indicate that firms with controlling family shareholders fared significantly better than other firms in the pandemic period. This effect is particularly pronounced among firms in which a family is both the controlling shareholder and holds the CEO position. Collectively, our results expand existing knowledge on the determinants of organizational resilience in the wake of adverse events. |
| Keywords: | CEOs; COVID-19; Family Business; Financial Performance |
| JEL: | D10 G34 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14759&r=all |
| By: | Aggarwal, Shilpa; Dizon-Ross, Rebecca; Zucker, Ariel |
| Abstract: | How should the design of incentives vary with agent time preferences? We develop two predictions. First, "bundling" the payment function over time â?? specifically by making the payment for future effort increase in current effort -- is more effective if individuals are impatient over effort. Second, increasing the frequency of payment is more effective if individuals are impatient over payment. We test the efficacy of time-bundling and payment frequency, and their interactions with impatience, using a randomized evaluation of an incentives program for exercise among diabetics in India. Consistent with our theoretical predictions, bundling payments over time meaningfully increases effort among the impatient relative to the patient. In contrast, increasing payment frequency has limited efficacy, suggesting limited impatience over payments. On average, incentives increase daily steps by 1,266 (13 minutes of brisk walking) and improve health. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14751&r=all |