Open AccessCorporate control and executive selection
Author(s) -
Lippi Francesco,
Schivardi Fabiano
Publication year - 2014
Publication title -
quantitative economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 4.062
H-Index - 27
eISSN - 1759-7331
pISSN - 1759-7323
DOI - 10.3982/qe244
Subject(s) - control (management) , distortion (music) , business , sample (material) , productivity , selection (genetic algorithm) , value (mathematics) , shareholder , prestige , government (linguistics) , benchmark (surveying) , industrial organization , microeconomics , accounting , corporate governance , economics , finance , management , statistics , philosophy , cmos , electronic engineering , artificial intelligence , macroeconomics , amplifier , linguistics , chemistry , computer science , engineering , geodesy , chromatography , geography , mathematics
In firms with concentrated ownership the controlling shareholder may pursue nonmonetary private returns, such as electoral goals in a firm controlled 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%.