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on Human Capital and Human Resource Management |
| By: | Marc Claveria-Mayol |
| Abstract: | I study a moral hazard problem between a principal and multiple agents who experience positive peer effects represented by a (weighted) network. Under the optimal linear contract, the principal provides high-powered incentives to central agents in the network in order to exploit the larger incentive spillovers such agents create. The analysis reveals a novel measure of network centrality that captures rich channels of direct and indirect incentive spillovers and characterizes the optimal contract and its induced equilibrium efforts. The notion of centrality relevant for incentive spillovers in the model emphasizes the role of pairs of agents who link to common neighbors in the network. This characterization leads to a measure of marginal network effects and identifies the agents whom the principal targets with stronger incentives in response to the addition (or strengthening) of a link. When the principal can position agents with heterogeneous costs of effort in the network, the principal prefers to place low-cost agents in central positions. The results shed light on how firms can increase productivity through corporate culture, office layout, and social interactions. |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.11660&r= |
| By: | Bo Peng; Zhihao Gavin Tang |
| Abstract: | We consider the robust contract design problem when the principal only has limited information about the actions the agent can take. The principal evaluates a contract according to its worst-case performance caused by the uncertain action space. Carroll (AER 2015) showed that a linear contract is optimal among deterministic contracts. Recently, Kambhampati (JET 2023) showed that the principal's payoff can be strictly increased via randomization over linear contracts. In this paper, we characterize the optimal randomized contract, which remains linear and admits a closed form of its cumulative density function. The advantage of randomized contracts over deterministic contracts can be arbitrarily large even when the principal knows only one non-trivial action of the agent. Furthermore, our result generalizes to the model of contracting with teams, by Dai and Toikka (Econometrica 2022). |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2406.11528&r= |
| By: | C.S. Agnes Cheng; Iftekhar Hasan; Feng Tang; Jing Xie (Department of Finance and Business Economics, Faculty of Business Administration, University of Macau) |
| Abstract: | Our paper shows that when a compensation peer firm experiences a significant failure in its say on pay (SOP) voting, the focal firm’s stock price is adversely affected, and as a result, the CEO’s pay is reduced in the subsequent period. This pay-reduction effect is amplified when the board of directors is more powerful relative to the CEO, when proxy advisors have expressed concerns about CEO pay, and when the quality of the hired compensation consultant is lower. Moreover, directors who react to the price drop and cut the CEO’s pay receive higher voting support from investors in future director elections. Our findings demonstrate the existence of a market feedback effect for directors of the focal firm triggered by their peers’ SOP voting failure. These findings have implications for regulators and offer insights into the efficacy of SOP voting rules. |
| Keywords: | Feedback Effect; Learning from Prices; Say-on-pay Vote; Executive Compensation; Spillover Effect; Shareholder Activism |
| JEL: | G34 M12 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:boa:wpaper:202408&r= |
| By: | Brooke Helppie McFall; Eric D. Parolin; Basit Zafar |
| Abstract: | This paper investigates gender gaps in long-term career expectations and outcomes of PhD candidates in economics. For this purpose, we match rich survey data on PhD candidates (from the 2008-2010 job market cohorts) to public data on job histories and publication records through 2022. We document four novel empirical facts: (1) there is a robust gender gap in career expectations, with females about 10 percentage points less likely to ex-ante expect to get tenure or publish regularly; (2) the gender gap in expectations is remarkably similar to the gap observed for academic outcomes; (3) expectations are similarly predictive of outcomes for males and females. In addition, the predictive power of expectations does not differ by the relationship status of the individual; and (4) gender gaps in expectations can explain about 19% and 13% of the ex-post gaps in tenure and publications, respectively. |
| JEL: | J16 J44 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32446&r= |