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on Human Capital and Human Resource Management |
| By: | Sheng Guo (Department of Economics, Florida International University); Qiang Kang (Department of Finance, Florida International University); Oscar A. Mitnik (Inter-American Development Bank) |
| Abstract: | We study the dynamics of two governance constructs, managerial influence over the board of directors and chief executive officer (CEO) compensation, in firms undergoing distress during 1992-2019. Data show a clear trend that governance improves over time, which confounds the inference about the effects of distress on governance. Controlling for the secular changes with a bias-corrected matching estimator, we find that distressed firms reduce managerial board appointments and CEO pay, intensify managerial incentive alignment, and increase CEO turnover. The bulk of CEO compensation changes in distressed firms derives from the performance-related part of compensation, consistent with the "shareholder value" view of CEO compensation. |
| Keywords: | Corporate distress, Managerial influence, CEO compensation, CEO turnover, Bias-corrected matching estimator |
| JEL: | G33 G34 J33 J44 M50 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:2123&r= |
| By: | Thomas Dohmen (IZA (Schaumburg-Lippe-Strasse 5-9, 53113 Bonn, Germany), University of Bonn (Institute for Applied Microeconomics, Adenauerallee 24-42, 53113 Bonn, Germany), Maastricht University (Tongersestraat 53, 6211 LM Maastricht, The Netherlands)); Arjan Non (Erasmus University Rotterdam (E building, Burgemeester Oudlaan 50, 3062 PA Rotterdam, The Netherlands)); Tom Stolp (Maastricht University (Tongersestraat 53, 6211 LM Maastricht, The Netherlands)) |
| Abstract: | We conduct laboratory experiments to investigate basic predictions of principal-agent theory about the choice of piece rate contracts in the presence of output risk, and provide novel insights that reference dependent preferences affect the tradeoff between risk and incentives. Subjects in our experiments choose their compensation for performing a real-effort task from a menu of linear piece rate and fixed payment combinations. As classical principal-agent models predict, more risk averse individuals choose lower piece rates. However, in contrast to those predictions, we find that low-productivity risk averse workers choose higher piece rates when the riskiness of the environment increases. We hypothesize that reference points affect piece rate choice in risky environments, such that individuals whose expected earnings would exceed (fall below) the reference point in a risk-free environment behave risk averse (seeking) in risky environments. In a second experiment, we exogenously manipulate reference points and confirm this hypothesis. |
| Keywords: | Incentive, piece-rate, risk, reference point, laboratory experiment |
| JEL: | D81 D91 M52 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:125&r= |
| By: | Roya Taherifar (University of Waikato); Mark J. Holmes (University of Waikato); Gazi M. Hassan (University of Waikato) |
| Abstract: | It is argued that pay inequality between CEOs and employees impacts employee performance, although empirical studies are inconsistent about the directionality of the effect. This paper shows that seemingly contradictory predictions of sociological and economic perspectives about the impact of pay inequality are more complementary than contradictory. Using data from a sample of public companies over the period 2004-2019, we show that pay inequality attributed to individuals’ skills, company characteristics, and labour market is positively associated with employee performance. However, this positive impact on employee performance declines at high levels of pay disparity. In addition, pay inequality based on other unknown factors has a negative impact on employee performance. |
| Keywords: | CEO compensation;pay inequality;pay ratio;employee performance;productivity |
| JEL: | D24 G34 J31 M12 M52 |
| Date: | 2021–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:21/14&r= |
| By: | Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl |
| Abstract: | We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these findings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers. |
| Keywords: | relational contracts, hold-up, buyer-supplier contracts, bargaining power |
| JEL: | D86 L14 L62 O34 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9362&r= |
| By: | Chuan, A.; Zhang, W. |
| Abstract: | Women used to lag behind men in college enrollment but now exceed them. We argue that changes in non-college job prospects contributed to these trends. We first document that routine-biased technical change disproportionately displaced non-college occupations held by women. We next employ a shift-share instrument for the impact of routinization to show that declining non-college job prospects for women increased female enrollment. Results show that a one percentage point decline in the share of routine task intensive jobs leads to a 0.6 percentage point rise in female college enrollment, while the effect for male enrollment is directionally smaller and insignificant. We next embed this instrumental variation into a dynamic model that links education and occupation choices. The model finds that routinization decreased returns to non-college occupations for women, leading them to shift to cognitive work and increasing their college premium. In contrast, non-college occupations for men were less susceptible to routinization. Altogether, our model estimates that workplace routinization accounted for 63% of the growth in female enrollment and 23% of the change in male enrollment between 1980 to 2000. |
| Keywords: | human capital, college enrollment, gender, occupations, automation |
| JEL: | I23 I24 I26 J16 J24 I26 |
| Date: | 2021–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2177&r= |
| By: | Cascino, Stefano; Clatworthy, Mark A.; Osma, Beatriz Garcia; Gassen, Joachim; Imam, Shahed |
| Abstract: | We examine how investment professionals assess the usefulness of financial accounting information depending on their information acquisition objectives and preparers’ earnings management incentives. We conduct a survey experiment based on face-to-face interviews with investment professionals and document two main results. First, we find that, compared with investment professionals assigned a firm valuation objective, those assigned a managerial performance evaluation objective assess accounting information as significantly less useful. Second, we find no systematic evidence that preparers’ earnings management incentives negatively affect investment professionals’ assessments of accounting information usefulness. To elucidate this second finding, we conduct a large-scale follow-up online experiment. Our results continue to offer no support for the effect of earnings management incentives on investment professionals’ assessments of accounting information usefulness, irrespective of preparers’ corporate governance quality. Instead, we find that poor corporate governance, by itself, reduces the usefulness of accounting information to investment professionals. |
| Keywords: | decision usefulness; financial reporting objectives; earnings management; corporate governance; investment professionals; relevance; representational faithfulness |
| JEL: | G15 G18 G38 M41 |
| Date: | 2021–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107569&r= |
| By: | Keusch, Thomas |
| Abstract: | Using hand-collected data on CEO appointments during shareholder activism campaigns, this study examines whether shareholder involvement in CEO recruiting affects frictions in CEO hiring decisions. The results indicate that appointments of CEOs who are recruited with shareholder activist influence are followed by more favorable stock market reactions and stronger profitability improvements than CEO appointments that also occur during activism campaigns but without the influence of activists. I find little evidence that shareholder activists increase hiring frictions by facilitating the recruiting of CEOs who will implement myopic corporate policies. Analyses of recruiting process characteristics reveal that activist influence is associated with more resources being dedicated to the CEO search process and with a higher propensity to recruit CEOs from outside the firm. These findings contribute to the CEO labor market literature, which tends to focus on the decision to remove incumbent CEOs but provides limited insights into CEO recruiting. |
| Keywords: | Executive labor market,corporate governance,shareholder activism |
| JEL: | G23 G32 G34 M12 M51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:lawfin:19&r= |
| By: | Gibson, Rajna; Sohn, Matthias; Tanner, Carmen; Wagner, Alexander F. |
| Abstract: | Extant research shows that CEO characteristics affect earnings management. This paper studies how investors infer a specific characteristic of CEOs, namely moral commitment to honesty, from earnings management and how this perception - in conjunction with their own social and moral preferences - shapes their investment choices. We conduct two laboratory experiments simulating investment choices. Our results show that participants perceive a CEO to be more committed to honesty when they infer that the CEO engaged less in earnings management. For investment decisions, a one standard deviation increase in a CEO's perceived commitment to honesty compared to another CEO reduces the relevance of differences in the CEOs' claimed future returns by 40%. This effect is most prominent among investors with a proself value orientation. To prosocial investors, their own honesty values and those attributed to the CEO matter directly, while returns play a secondary role. Overall, perceived CEO honesty matters to different investors for distinct reasons. |
| Keywords: | Earnings management,honesty,investor preferences,investor segmentation,protected values |
| JEL: | M41 G41 G11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:lawfin:7&r= |
| By: | Jacobs, Valentine; Rycx, François; Volral, Mélanie |
| Abstract: | This paper analyses the wage effects of educational mismatch by workers’ origin using a sizeable, detailed matched employer-employee dataset for Belgium. Relying on a fine-grained approach to measuring educational mismatch, the results show that over-educated workers, regardless of their origin, suffer a wage penalty compared to their well-matched former classmates. However, the magnitude of this wage penalty is found to vary considerably depending on workers’ origin. In addition, the estimates show that origin-based differences in over-education wage penalties significantly depend on both demographics (workers’ region of birth, education, and gender) and employer characteristics (firm size and collective bargaining). |
| Keywords: | Immigrants,educational mismatch,wage gap,linked employer-employee data |
| JEL: | I24 I26 J15 J24 J31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:966&r= |
| By: | Kim, Jun Hyung; Koh, Yu Kyung; Park, Jinseong |
| Abstract: | This paper examines the effects of working from home on mental health, using unique real time survey data from South Korea collected during the COVID-19 pandemic. We find that working from home negatively affects the mental health of workers in the first half of 2020. Furthermore, we find substantial heterogeneity across gender and home environment. The negative impact of working from home is concentrated on women, and on those who are primarily responsible for housework while also maintaining market work. Surprisingly, workers who live with children in the household do not suffer from the negative effects of working from home. Our findings suggest that family-work interaction may be an important factor in the optimal design of working from home. |
| Keywords: | Working from home,home working,remote work,COVID-19,mental health,subjective well-being |
| JEL: | D13 L23 L84 M11 M54 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:960&r= |