THREE ESSAYS ON FIRM AND MANAGERIAL PERFORMANCE
Bibliographic record
Abstract
The three essays of this dissertation examine managerial actions and strategies in response to firm-specific situations, and the resulting firm and managerial performance.\nEssay 1 disentangles managerial ability and firm efficiency and examines managerial ability conditional on firm efficiency. Prior research on managerial ability overlook under- lying firm efficiency. Observing that the two measures of quality are highly correlated, I disentangle managerial ability from firm efficiency and create new measures for innate (pure) managerial ability and relative managerial ability (conditional on firm efficiency). I categorize managers as underrated (high managerial ability, low firm efficiency), typical (managerial ability and firm efficiency at par), and overrated (low managerial ability, high firm efficiency), and examine the consequent corporate strategies, firm performance and CEO compensation. Overrated managers inherit (i.e., are in charge of) dynamic firms but adopt conservative strategies themselves; the opposite is true for underrated managers. Overrated managers elicit negative firm performance while underrated managers engender positive firm performance. In contrast, overrated managers are overcompensated and underrated man- agers are undercompensated; innate (pure) managerial ability, by itself, has no bearing upon compensation. These results indicate the importance of disentangling managerial ability from firm efficiency to better understand the relevance of corporate quality towards corporate strategies, firm performance and CEO compensation. It may be inferred that managerial ability, per se, is likely a hype.\nEssay 2 studies the impact of non-compete clause enforcement on firm performance and employees. Existing literature on non-compete clauses (NCCs) focuses on the effect on firm characteristics other than performance, and the effect on top executives rather than general employees. My research examines the effect of NCC enforcement on firm performance and general employees. For the full sample of firms NCC enforcement has a non-significant relation to firm financial performance, a positive, significant relation to firm operating performance, and a negative, significant relation to employee metrics (total employees, total employee expense and average wage). The results, however, change drastically for subsam- ples: firms with low versus high performance, and firms with weak versus strong policies. NCC enforcement has a positive (negative), significant relation to firm financial performance for firms with low (high) financial performance and a nonsignificant (negative) relation to firm financial performance for firms with weak (strong) corporate governance with mixed effects of NCC enforcement on operating performance. Taken together my findings provide initial evidence that NCC enforcement has a beneficial effect on the worst firms, a detrimental effect on the best firms, and a detrimental effect on employees overall.\nEssay 3 looks into the behavior of firm managers in response to success and distress. I examine prospect theory in the context of corporate decision making: how firm managers change corporate strategies in response to firm-specific success and firm-specific distress. Based on these changes in corporate strategies I categorize the behavioral disposition of managers as house money effect, status quo effect, conservatism effect, trying-to-break-even effect, status quo effect, and snake bite effect; and examine the subsequent firm performance of each group. Managers are more risk-avoiding if the intensity (duration) of success is higher (longer); managers are more risk-taking if the intensity (duration) of distress is higher (longer). Following success, house money effect managers have the smallest decrease in firm performance while conservative managers have the largest; following distress, trying-to- break-even managers have the largest increase in firm performance while snake bite effect managers had the largest decrease in firm performance. In addition, younger (smaller) firms are more risk-taking following distress (following success and distress) and firms with payout are more risk-avoiding following both success and distress. Younger (shorter tenured) CEO's are also more risk-taking following distress (following success and distress) and female CEO's are more risk-taking following distress. Overall, this paper provide supports for prospect theory in a corporate finance decision-making setting: firm managers have very different risk behaviors following gains (success) and distress (losses); and the risk attitude depends on the intensity and duration of success/distress. In addition, following either success or distress, risk-taking managers are rewarded with higher subsequent firm performance while risk-avoiding managers are punished with lower subsequent firm performance.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.014 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.001 |
| Bibliometrics | 0.003 | 0.002 |
| Science and technology studies | 0.002 | 0.004 |
| Scholarly communication | 0.006 | 0.004 |
| Open science | 0.001 | 0.003 |
| Research integrity | 0.002 | 0.004 |
| Insufficient payload (model declined to judge) | 0.010 | 0.003 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".