Raids, Rewards, and Reputations in the Market for Managerial Talent

Fee, C. Edward; Hadlock, Charles J.

doi:10.1093/rfs/hhg031

Cited by 307 publications

(232 citation statements)

References 57 publications

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“…Both the model itself and the signal jamming logic that it develops have been applied by economic theorists in a wide array of fields, including labor relationships and organizational economics (for a survey see Borland 1992), industrial organization (e.g., Tirole 1986, Samuelson et al 1994), financial economics (e.g., Stein 1989), and political economy (e.g., Lohmann 1998, 1999, LeBorgne and Lockwood 2006. However, the abundance of theoretical work has been met by relatively few empirical studies on the effectiveness of career concerns (Gibbons andMurphy 1992, Fee andHadlock 2003).…”

Section: A N U S C R I P T 1 Introductionmentioning

confidence: 99%

Career Concerns Incentives: An Experimental Test

2009

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Holmström's (1982/99) career concerns model has become a workhorse for analyzing agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with field data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: i) the signal jamming mechanism successfully creates incentives on the labor supply side; ii) decision errors take time to decrease; iii) while subjects' average beliefs are remarkably consistent with play, a mild winner's curse arises on the labor demand side.JEL-Classification: C91, D83, L14

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Section: A N U S C R I P T 1 Introductionmentioning

confidence: 99%

Career Concerns Incentives: An Experimental Test

2009

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“…Higher past performance leads to more outside directorships, as shown by Kaplan and Reishus (1990) for senior executives, Ferris, Jagannathan, and Pritchard (2003) for corporate directors and executives, and Harford and Schonlau (2013) for CEOs and directors. Fee and Hadlock (2003) find that CEOs appointed from outside the company come from firms with above-average stock performance. The mergerrelated literature also delivers insights into the relationship between past performance and management outcomes.…”

Section: Hypothesis Development and Study Designmentioning

confidence: 92%

“…Both measures follow the literature that suggests information of the previous banks as possible indicators of managerial talent (e.g. Kaplan and Reishus, 1990;Fee and Hadlock, 2003;Demerjian, Lev, and McVay, 2012). Fee and Hadlock (2003) postulate that labor markets use firm performance as an indicator of managerial ability and that executives from superior-performing firms have developed valuable management skillsin the sense that these managers have learned "how to win" Hadlock, 2003, p. 1324).…”

Section: Introductionmentioning

confidence: 99%

“…Kaplan and Reishus, 1990;Fee and Hadlock, 2003;Demerjian, Lev, and McVay, 2012). Fee and Hadlock (2003) postulate that labor markets use firm performance as an indicator of managerial ability and that executives from superior-performing firms have developed valuable management skillsin the sense that these managers have learned "how to win" Hadlock, 2003, p. 1324). Following this line of reasoning, we build our first measure with the performance of executive directors' previous banks observed directly before they are appointed to another bank.…”

Section: Introductionmentioning

confidence: 99%

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Do all new brooms sweep clean? Evidence for outside bank appointments

Kick

Nehring

Schertler

2017

Journal of Banking & Finance

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We investigate whether bank executive directors appointed from outside the bank ("outsiders") improve post-succession performance and whether some outsiders are better predisposed than others to turn around a bank's performance. In the case of banks, this question is highly relevant because regulatory authorities may regard the replacement of the management team as a chance to clean up financially distressed banks. Our sample compromises all universal banks for the period 1993 to 2014. ContributionFirst, the results of our study contribute to the existing literature on the post-succession effects of executive turnovers by documenting a performance differential between outsiders with strong and poor managerial abilities in the years following their appointment. Second, we add to the literature examining managerial ability by extracting managerial ability from the risk-return efficiency of executive directors' previous banks. Third, we add to the literature dealing with the financial crisis by measuring the performance effects separately for the pre-and post-crisis period. ResultsOur study documents the negative performance effects in the years following the appointment of an outsider on banks making such appointments. We find that executives with poor managerial abilities ("bad outsiders") underperform at their new banks during the post-appointment period whereas executives with strong managerial abilities ("good outsiders") do so only at the very beginning of the post-appointment period. Thus, not all executive directors appointed from outside are equally capable of improving bank performance. Our results further suggest that the performance differential between good and bad outsiders strengthens in the post-crisis period. We systematically rule out that these performance differentials following external appointments are driven by appointing good outsiders to boards of banks with a low risk exposure. Banks in bad financial shape are more likely to appoint executive directors from the outside than those in good shape. It is, however, not clear whether all of these appointments necessarily lead to the desired turnaround. We analyze the performance effects of new board members with external boardroom experience (outsiders) by distinguishing between good and bad managerial abilities of executives based on either ROA or risk-return efficiency of their previous employers. Our results show that banks appointing bad outsiders underperform other banks while those appointing good outsiders do so to a lesser extent. The performance differentials are highly pronounced in high-risk banks and in the post-crisis period.

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“…A manager will not be so foolish as to report higher earnings than can be reached because the reduction in the future earnings would disappoint the investors who would then punish them through capital and labor market reactions (Barth et al 1999;and Fee and Hadlock 2003).…”

Section: Literature Review and Hyphoteses Developmentmentioning

confidence: 99%

Is Earnings Management Informational or Opportunistic? Evidence from ASEAN Countries

Wardani

Kusuma

2012

GADJAH MADA INT. J. BUS.

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This study explores the informational and opportunistic characteristics of earnings management in ASEAN countries. Earnings management has an impact on the profitability of the companies. A positive relation between earnings management and future profitability reveals that earnings management is informational. However, negative a relation between earnings management and future profitability indicates that earnings management is opportunistic.This study uses data from the OSIRIS database. Four hundred and eighty five (485) companies from the Philippines, Indonesia, Malaysia, Singapore, and Thailand are used as a sample. This study focuses on 2 types of earnings management: (1) accrual earnings management and (2) real earning management. Modified Jones model is used for the accrual earnings management. Real earnings management follows Roychowdury (2006).The results show that the characteristics of earnings management are not consistent. Real earnings management is informational in Thailand, but opportunistic in Indonesia. Accruals earnings management is informational in the Philippines, but opportunistic in Malaysia. Country factors such as culture may explain the inconsistency of the results in ASEAN.Abstrak: Penelitian ini mengeksplorasi karakteristik informasional dan oportunistik dari manajemen laba di negara-negara ASEAN. Manajemen laba akan berdampak pada kemampulabaan perusahaan. Hubungan positif antara manajemen laba dan kemampulabaan di masa depan mengungkapkan bahwa manajemen laba bersifat informasional. Sebaliknya, hubungan negatif antara manajemen laba dan kemampulabaan perusahaan di masa depan mengindikasikan bahwa manajemen laba bersifat oportunistik.Penelitian ini menggunakan data dari database OSIRIS. Empat ratus delapan puluh lima (485) perusahaan dari Filipina, Indonesia, Malaysia, Singapura, dan Thailand digunakan sebagai sampel. Penelitian ini berfokus pada dua jenis manajemen laba: (1) manajemen laba akrual dan (2)

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Raids, Rewards, and Reputations in the Market for Managerial Talent

Cited by 307 publications

References 57 publications

Career Concerns Incentives: An Experimental Test

Career Concerns Incentives: An Experimental Test

Do all new brooms sweep clean? Evidence for outside bank appointments

Is Earnings Management Informational or Opportunistic? Evidence from ASEAN Countries

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