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Corporate control and executive selection

Lippi, Francesco and Schivardi, Fabiano (2014) Corporate control and executive selection. Quantitative economics, Vol. 5 (2), p. 417-456. ISSN 1759-7323. eISSN 1759-7331. Article.

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DOI: 10.3982/QE244

Abstract

In firms with concentrated ownership the controlling shareholder may pursue nonmonetary private returns, such as electoral goals in a firmcontrolled by politicians or family prestige in family firms.We use a simple theoretical model to analyze how this mechanism affects the selection of executives and, through this, the firm’s productivity compared to a benchmark where the owner only cares about the value of the firm.We discuss identification and derive two structural estimates of the model, based on different sample moments. The estimates, based on a matched employer–employee data set of Italian firms, suggest that private returns are larger in family- and government-controlled firms than in firms controlled by a conglomerate or by a foreign entity. The resulting distortion in executive selection can account for total factor productivity differentials between control types of up to 10%.

Item Type:Article
ID Code:10823
Status:Published
Refereed:Yes
Uncontrolled Keywords:Corporate governance, private returns, total factor productivity
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Divisions:001 Università di Sassari > 01-a Nuovi Dipartimenti dal 2012 > Scienze economiche e aziendali
Publisher:Econometric Society
ISSN:1759-7323
eISSN:1759-7331
Copyright Holders:© 2014 Francesco Lippi and Fabiano Schivardi
Deposited On:26 Feb 2015 13:10

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