nep-hrm New Economics Papers
on Human Capital and Human Resource Management
Issue of 2020‒09‒14
seven papers chosen by
Patrick Kampkötter
Eberhard Karls Universität Tübingen

  1. Does bonus cap curb risk taking? An experimental study of relative performance pay and bonus regulation By Harris, Qun; Tanaka, Misa; Soane, Emma
  2. Redistribution with Performance Pay By Doligalski, Pawel; Ndiaye, Abdoulaye; Werquin, Nicolas
  3. Improving Management through Worker Evaluations: Evidence from Auto Manufacturing By Jing Cai; Shing-Yi Wang
  4. Employee participation in decision making and its effect on job satisfaction By Mohsen, Ahsanullah; Sharif, Omer
  5. In CEOs we trust: When religion matters in cross-border acquisitions. The case of a multifaith country By Diana W. P. Kwok; Pierre-Xavier Meschi; Olivier Bertrand
  6. Competition and Career Advancement: The Hidden Costs of Paid Leave By Johnsen, Julian; Ku, Hyejin
  7. The Effect of Managers on Systematic Risk By Antoinette Schoar; Kelvin Yeung; Luo Zuo

  1. By: Harris, Qun (Bank of England); Tanaka, Misa (Bank of England); Soane, Emma (London School of Economics and Political Science)
    Abstract: We conducted a lab experiment with 253 participants to examine how constraints on bonus akin to bonus regulations, such as bonus cap and malus, could affect individuals’ risk-taking in the presence of relative performance pay. Participants took greater risks when bonus was linked to investment performance relative to that of their peers (relative performance pay) than when it depended on their own performance only. In the absence of relative performance pay, bonus cap and malus reduced risk-taking. With relative performance pay, the risk-mitigating effects of bonus cap and malus were significantly weakened; but participants took less risk when bonus was made conditional on their team avoiding a loss.
    Keywords: Bonus cap; malus; bonus regulation; risk choice
    JEL: C91 G28 J31 J33 M52
    Date: 2020–08–14
  2. 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 labor contracts arise as a result of moral hazard frictions within firms. We derive novel formulas for the incidence of arbitrarily nonlinear reforms of a given tax code on both average earnings and their sensitivity to output risk. We show theoretically and quantitatively that, following an increase in tax progressivity, the higher sensitivity of earnings to performance caused by the crowding-out of private insurance is almost fully o�set 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: 2020–05
  3. By: Jing Cai; Shing-Yi Wang
    Abstract: Using a randomized experiment with an automobile manufacturing firm in China, we measure the effects of letting workers evaluate their managers on worker and firm outcomes. In the treatment teams, workers evaluate their supervisors monthly. We find that providing feedback leads to significant reductions in worker turnover and increases in team-level productivity. In addition, workers report higher levels of happiness and positive mood. The evidence suggests that these results are driven by changes in the behavior of managers and an overall better relationship between managers and workers.
    JEL: D22 O1
    Date: 2020–08
  4. By: Mohsen, Ahsanullah; Sharif, Omer
    Abstract: This research was set to determine the effects of Participatory Decision Making on Employee Satisfaction in Afghanistan International Bank. The core objective of this research is to determine the effects of participation in decision making on employee satisfaction among Afghanistan International Bank staff members. The study also examines the impact of employee commitment, organizational structure, leader behavior, academic level, and workplace on the job satisfaction of the staff. The importance of collaborative management empowering the member of the workforce today is one of the core tasks of managers. The general population of the study comprises employees of Afghanistan International Bank (AIB). The information gathered in this study consists of primary data and secondary data including articles, previous research, and websites. SPSS 24 software was used to analyze the information. Regression analysis was used to accept or reject the hypotheses and determine the relationship between personnel participation in decision making and job satisfaction. The results show that employee involvement in decision making has a positive effect on job satisfaction, while bank employees still participate in the decision making on average. The results also show that employee commitment, organizational structure, leader behavior, and the workplace are among the factors that produce a positive impact on participation in decision making and the level of education endures no relationship with participation in decision making.
    Keywords: Job Satisfaction Participative Decision Making Employee Commitment Employee Participation
    JEL: M0 M1 M12 M2
    Date: 2020–07
  5. By: Diana W. P. Kwok (Humanis - Hommes et management en société / Humans and management in society - UNISTRA - Université de Strasbourg); Pierre-Xavier Meschi (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon); Olivier Bertrand (Brazilian School of Public and Business Administration [Rio de Janeiro])
    Abstract: This paper examines the emergence of trust by multifaith target-firm personnel in foreign acquirer CEOs during early post-acquisition integration, a decisive period for acquisition success, yet considerably under-researched. Combining self-categorization and similarity-attraction theories, we argue that religious similarity with the foreign acquirer's CEO represents shared values to the personnel, from which trust in the CEO arises. Further, we scrutinize the moderating effects of the personnel's religiosity and prior alliance success between the acquirer and target firm. We test our model using field-experimental data from 411 multifaith Malaysian personnel. The findings show that personnel-leader trust occurs more readily with religious similarity than religious dissimilarity, and that the personnel's religiosity strengthens this relationship. However, a successful prior alliance does not weaken the religious similarity–trust relationship. Our research encourages acquisition managers to consider religion, a factor beyond the traditional acquisition playbook, as a trust antecedent during early post-acquisition integration.
    Keywords: Interpersonal trust,Cross-border acquisitions,Religion,Malaysia,Multifaith employee,Experimental methods
    Date: 2020
  6. By: Johnsen, Julian (Centre for Applied Research, Norwegian School of Economics); Ku, Hyejin (University College London)
    Abstract: Does leave-taking matter for young workers’ careers? If so, why? We propose the competition effect—relative leave status of workers affecting their relative standing inside the firm—as a new explanation. Exploiting a policy reform that exogenously assigned four-week paid paternity leave to some new fathers, we find evidence consistent with the competition effect: A worker enjoys a better post-child earnings trajectory when a larger share of his colleagues take leave because of the policy. In contrast, we find no direct earnings effect resulting from the worker’s own leave when controlling for their relative leave eligibility status within the firm.
    Keywords: leave of absence; career interruptions; ranking; tournament; promotion; gender gap
    JEL: J16 J22 J24 J31 M51 M52
    Date: 2020–08–01
  7. By: Antoinette Schoar; Kelvin Yeung; Luo Zuo
    Abstract: Tracking the movement of top managers across firms, we document the importance of manager-specific fixed effects in explaining heterogeneity in firm exposures to systematic risk. These differences in systematic risk are partially explained by managers’ corporate strategies, such as their preferences for internal growth and financial conservatism. Managers’ early-career experiences of starting their first job in a recession also contribute to differential loadings on systematic risk. These effects are more pronounced for smaller firms. Overall, our results suggest that managerial styles have important implications for asset prices.
    JEL: G12 G30
    Date: 2020–07

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