Job assignment, market power and managerial incentives

Dam, Kaniṣka

doi:10.1016/j.qref.2014.11.001

Cited by 6 publications

(8 citation statements)

References 35 publications

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“…Market competitiveness increases the demand of superior managerial talent in companies and accordingly gives rise to director pay. However, several findings explain the positive link between PMC and director compensation as an effort to induce managers to exert more effort, reduce agency problems where the decisions concern stockholders' wealth and attract or retain the talented executives in the company (Aoki, 1982;Cuñat & Guadalupe, 2005;Dam, 2015;Jensen & Murphy, 1990;Karuna, 2007).…”

Section: Discussionmentioning

confidence: 99%

“…According to Dam (2015), as PMC is a natural force facing every company, it is worthy to investigate the impact of PMC on managerial incentives. High PMC only leads to greater return, thanks to the efforts in cost reduction by executives.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, several findings contend that the positive link between PMC and director compensation is an effort to induce managers to exert more effort. Furthermore, this tendency reflects an attempt to reduce agency problems, especially where the managerial decisions made concern matters affecting the stockholders' wealth or attracting or retaining talented executives in the company (Aoki, 1982;Bulan, Sanyal, & Yan, 2010;Cuñat & Guadalupe, 2005;Dam, 2015;Jensen & Murphy, 1990;Karuna, 2007). Building on these theoretical assumptions, we aim to examine the association between PMC and managerial compensation for firms in the relatively small emerging market of Malaysia.…”

Section: Introductionmentioning

confidence: 99%

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Market Competition, Managerial Incentives and Agency Cost

Loh

Kontesa

2019

Global Business Review

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This study investigates the determinants of board of director compensation from the view of strategic management. Specifically, this study examines the association between product market competition and directors’ compensation for a sample of 524 listed firms in Malaysia from 2010 to 2014. We find that there is a positive relationship between a competitive firm and its compensation to its directors. Our research indicates that managerial incentives reflect more of talent appreciation, rather than purely for acknowledging better performance or a bigger size firm. This research contests the use of agency theory and managerialism in explaining directors’ compensation, especially for the developing country context of Malaysia. Our findings also imply that firms may pay higher compensation in a competitive market.

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Section: Discussionmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Market Competition, Managerial Incentives and Agency Cost

Loh

Kontesa

2019

Global Business Review

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“…A particularly simple contract emerges under the additional monotonicity constraint that the principal's pro…t cannot be decreasing in the outcome, that is, x w(x) is non-decreasing in x. 21 In this case, the optimal contract is a "debt contract"for the principal where she obtains min fx; zg, for some z > 0. Thus, the optimal salary scheme is w (x) = max fx z; 0g for all x 2 X.…”

Section: Model 4: Limited Liabilitymentioning

confidence: 99%

Moral hazard: Base models and two extensions

Macho‐Stadler¹,

Pérez‐Castrillo²

2018

Handbook of Game Theory and Industrial Organization, Volume I

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We analyze the optimal contract in static moral hazard situations, where the agent's e¤ort is not veri…able. We …rst present the main trade-o¤s of the principal-agent model. We cover the trade-o¤ of incentives (motivation) vs. risk-sharing (e¢ ciency), incentives vs. rents (when the agent is protected by limited liability), incentives to a task vs. incentives to another (in a multitask situation), and incentives to the agent vs. incentives to the principal (when both exert a non-veri…able e¤ort). Then, we discuss two recent extensions: how incorporating behavioral biases in the analysis of incentives a¤ects the predictions of the classical moral hazard model, and the insertion of the principal-agent problem in a matching market.

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“…Li and Ueda ), or firms with greater market power (e.g. Dam ). Many of these papers show that assortative matching significantly explains the observed variations in the level and incentive structure of CEO pay.…”

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confidence: 99%

A Two‐sided Matching Model of Monitored Finance

Dam

2018

Economica

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We analyse an incentive contracting model of partnership formation between heterogeneous investors and entrepreneurs. Partnerships are subject to double-sided moral hazard problems in entrepreneurial action and monitoring by investors. Greater monitoring ability implies stronger incentives to monitor. On the other hand, low-collateral borrowers have lower inside equity participation. Hence the incentive problem is best mitigated by assigning low-collateralized entrepreneurs to high-ability investors following a negative assortative matching pattern. Moreover, negative assortative matching implies that the equilibrium loan rate is in general non-monotonic in borrower collateral. Finally, our model sheds light on how changes in the inequality of collateral distribution affect the cost of external borrowing.

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Job assignment, market power and managerial incentives

Cited by 6 publications

References 35 publications

Market Competition, Managerial Incentives and Agency Cost

Market Competition, Managerial Incentives and Agency Cost

Moral hazard: Base models and two extensions

A Two‐sided Matching Model of Monitored Finance

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