[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/corfin/v79y2023ics0929119922001912.html
   My bibliography  Save this article

Managerial talent and managerial practices: Are they complements?

Author

Listed:
  • Baltrunaite, Audinga
  • Bovini, Giulia
  • Mocetti, Sauro
Abstract
We examine the role of managerial talent and its interaction with managerial practices in determining firm performance. We build a matched firm-director panel dataset for the universe of limited liability companies in Italy, tracking directors across different firms over time. We define managerial talent as the individual contribution to the variation of the firms’ total factor productivity, estimated using a two-way fixed effects model. Combining the data with survey information on a representative sample of firms, we then document that our measure of talent correlates with ex-ante and ex-post indicators of ability, i.e. managers’ educational attainment and their forecast precision with respect to the firm’s future performance. Most important, we leverage information on the adoption of managerial practices within the firm to examine potential synergies between managerial talent and structured managerial practices, thus bridging two separate strands of the literature. While talent and structured practices are positively associated with firm productivity on their own, there is evidence of complementarities between the two. These findings hold both in a cross-sectional setting and in a panel analysis that accounts for time-invariant firm heterogeneity. Overall, our results indicate that the effectiveness of managerial practices varies with managers’ ability to implement them.

Suggested Citation

  • Baltrunaite, Audinga & Bovini, Giulia & Mocetti, Sauro, 2023. "Managerial talent and managerial practices: Are they complements?," Journal of Corporate Finance, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:corfin:v:79:y:2023:i:c:s0929119922001912
    DOI: 10.1016/j.jcorpfin.2022.102348
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0929119922001912
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jcorpfin.2022.102348?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
    2. Ulrike Malmendier & Geoffrey Tate, 2005. "CEO Overconfidence and Corporate Investment," Journal of Finance, American Finance Association, vol. 60(6), pages 2661-2700, December.
    3. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1351-1408.
    4. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    5. Edward P. Lazear & Kathryn L. Shaw, 2007. "Personnel Economics: The Economist's View of Human Resources," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 91-114, Fall.
    6. Oriana Bandiera & Luigi Guiso & Andrea Prat & Raffaella Sadun, 2015. "Matching Firms, Managers, and Incentives," Journal of Labor Economics, University of Chicago Press, vol. 33(3), pages 623-681.
    7. Bernile, Gennaro & Bhagwat, Vineet & Yonker, Scott, 2018. "Board diversity, firm risk, and corporate policies," Journal of Financial Economics, Elsevier, vol. 127(3), pages 588-612.
    8. Itzhak Ben-David & John R. Graham, 2013. "Managerial Miscalibration," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(4), pages 1547-1584.
    9. Adams, Renée B. & Akyol, Ali C. & Verwijmeren, Patrick, 2018. "Director skill sets," Journal of Financial Economics, Elsevier, vol. 130(3), pages 641-662.
    10. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    11. Nicholas Bloom & Renata Lemos & Raffaella Sadun & Daniela Scur & John Van Reenen, 2014. "The New Empirical Economics of Management," NBER Working Papers 20102, National Bureau of Economic Research, Inc.
    12. Thomas Dohmen & Armin Falk, 2011. "Performance Pay and Multidimensional Sorting: Productivity, Preferences, and Gender," American Economic Review, American Economic Association, vol. 101(2), pages 556-590, April.
    13. Edward P. Lazear, 2000. "Performance Pay and Productivity," American Economic Review, American Economic Association, vol. 90(5), pages 1346-1361, December.
    14. Edward P. Lazear & Kathryn L. Shaw & Christopher T. Stanton, 2015. "The Value of Bosses," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 823-861.
    15. Nicholas Bloom & Benn Eifert & Aprajit Mahajan & David McKenzie & John Roberts, 2013. "Does Management Matter? Evidence from India," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(1), pages 1-51.
    16. Renée B. Adams & Heitor Almeida & Daniel Ferreira, 2005. "Powerful CEOs and Their Impact on Corporate Performance," The Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1403-1432.
    17. Oriana Bandiera & Andrea Prat & Stephen Hansen & Raffaella Sadun, 2020. "CEO Behavior and Firm Performance," Journal of Political Economy, University of Chicago Press, vol. 128(4), pages 1325-1369.
    18. Michael Carlos Best & Jonas Hjort & David Szakonyi, 2023. "Individuals and Organizations as Sources of State Effectiveness," American Economic Review, American Economic Association, vol. 113(8), pages 2121-2167, August.
    19. Morten Bennedsen & Kasper Meisner Nielsen & Francisco Perez-Gonzalez & Daniel Wolfenzon, 2007. "Inside the Family Firm: The Role of Families in Succession Decisions and Performance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 647-691.
    20. Stefan Bender & Nicholas Bloom & David Card & John Van Reenen & Stefanie Wolter, 2018. "Management Practices, Workforce Selection, and Productivity," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 371-409.
    21. Yueran Ma & Tiziano Ropele & David Sraer & David Thesmar, 2020. "A Quantitative Analysis of Distortions in Managerial Forecasts," NBER Working Papers 26830, National Bureau of Economic Research, Inc.
    22. Michela Giorcelli, 2019. "The Long-Term Effects of Management and Technology Transfers," American Economic Review, American Economic Association, vol. 109(1), pages 121-152, January.
    23. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
    24. Nicholas Bloom & John Van Reenen, 2010. "Why Do Management Practices Differ across Firms and Countries?," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 203-224, Winter.
    25. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    26. John R. Graham & Si Li & Jiaping Qiu, 2012. "Managerial Attributes and Executive Compensation," The Review of Financial Studies, Society for Financial Studies, vol. 25(1), pages 144-186.
    27. Custódio, Cláudia & Metzger, Daniel, 2014. "Financial expert CEOs: CEO׳s work experience and firm׳s financial policies," Journal of Financial Economics, Elsevier, vol. 114(1), pages 125-154.
    28. Nicholas Bloom & Erik Brynjolfsson & Lucia Foster & Ron Jarmin & Megha Patnaik & Itay Saporta-Eksten & John Van Reenen, 2019. "What Drives Differences in Management Practices?," American Economic Review, American Economic Association, vol. 109(5), pages 1648-1683, May.
    29. M. J. Andrews & L. Gill & T. Schank & R. Upward, 2008. "High wage workers and low wage firms: negative assortative matching or limited mobility bias?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 171(3), pages 673-697, June.
    30. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    31. Marvin B. Lieberman & Lawrence J. Lau & Mark D. Williams, 1990. "Firm-Level Productivity and Management Influence: A Comparison of U.S. and Japanese Automobile Producers," Management Science, INFORMS, vol. 36(10), pages 1193-1215, October.
    32. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    33. C. Edward Fee & Charles J. Hadlock & Joshua R. Pierce, 2013. "Managers with and without Style: Evidence Using Exogenous Variation," The Review of Financial Studies, Society for Financial Studies, vol. 26(3), pages 567-601.
    34. Nicholas Bloom & Renata Lemos & Raffaella Sadun & Daniela Scur & John Reenen, 2014. "Jeea-Fbbva Lecture 2013: The New Empirical Economics Of Management," Journal of the European Economic Association, European Economic Association, vol. 12(4), pages 835-876, August.
    35. Steven N. Kaplan & Mark M. Klebanov & Morten Sorensen, 2012. "Which CEO Characteristics and Abilities Matter?," Journal of Finance, American Finance Association, vol. 67(3), pages 973-1007, June.
    36. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    37. Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
    38. Alessandra Fenizia, 2022. "Managers and Productivity in the Public Sector," Econometrica, Econometric Society, vol. 90(3), pages 1063-1084, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. A. Baltrunaite & S. Formai & A. Linarello & S. Mocetti, 2024. "Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 993-1027, November.
    2. Johannes Carow, 2024. "A critical assessment of the two-way fixed-effects model for firm-level dependent variables," Working Papers 2405, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    3. Audinga Baltrunaite & Mario Cannella & Sauro Mocetti & Giacomo Roma, "undated". "Board composition and performance of state-owned enterprises: Quasi-experimental evidence," Temi di discussione (Economic working papers) 1328, Bank of Italy, Economic Research and International Relations Area.
    4. A. Baltrunaite & S. Formai & A. Linarello & S. Mocetti, 2024. "Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 993-1027, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. A. Baltrunaite & S. Formai & A. Linarello & S. Mocetti, 2024. "Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 993-1027, November.
    2. A. Baltrunaite & S. Formai & A. Linarello & S. Mocetti, 2024. "Ownership, Governance, Management and Firm Performance: Evidence from Italian Firms," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 10(3), pages 993-1027, November.
    3. Stefan Bender & Nicholas Bloom & David Card & John Van Reenen & Stefanie Wolter, 2018. "Management Practices, Workforce Selection, and Productivity," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 371-409.
    4. Ohlsbom, Roope, 2021. "Management Practices Drive Productivity – But Not Without Human Capital," ETLA Working Papers 88, The Research Institute of the Finnish Economy.
    5. Bloom, Nicholas & Van Reenen, John, 2011. "Human Resource Management and Productivity," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 19, pages 1697-1767, Elsevier.
    6. Bassi, Vittorio & Nyshadham, Anant & Tamayo, Jorge & Adhvaryu, Achyuta, 2020. "No Line Left Behind: Assortative Matching Inside the Firm," CEPR Discussion Papers 14554, C.E.P.R. Discussion Papers.
    7. Bilicka, Katarzyna & Scur, Daniela, 2024. "Organizational capacity and profit shifting," Journal of Public Economics, Elsevier, vol. 238(C).
    8. Anna Valero, 2021. "Education and management practices," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 37(2), pages 302-322.
    9. Dimitrios Exadactylos & Massimo Riccaboni & Armando Rungi, 2019. "Talents from Abroad. Foreign Managers and Productivity in the United Kingdom," Working Papers 01/2019, IMT School for Advanced Studies Lucca, revised Dec 2019.
    10. Sivropoulos-Valero, Anna Valero, 2021. "Education and management practices," LSE Research Online Documents on Economics 114436, London School of Economics and Political Science, LSE Library.
    11. Exadaktylos, Dimitrios & Riccaboni, Massimo & Rungi, Armando, 2024. "Talents from abroad. Foreign managers and productivity in the United Kingdom," International Economics, Elsevier, vol. 177(C).
    12. Maloney, William F. & Sarrias, Mauricio, 2017. "Convergence to the managerial frontier," Journal of Economic Behavior & Organization, Elsevier, vol. 134(C), pages 284-306.
    13. Claudia Custodio & Diogo Mendes & Daniel Metzger, 2021. "The impact of financial education of executives on financial practices of medium and large enterprises," NOVAFRICA Working Paper Series wp2105, Universidade Nova de Lisboa, Nova School of Business and Economics, NOVAFRICA.
    14. Anna Valero, 2021. "Education and management practices," POID Working Papers 007, Centre for Economic Performance, LSE.
    15. Oriana Bandiera & Renata Lemos & Andrea Prat & Raffaella Sadun, 2018. "Managing the Family Firm: Evidence from CEOs at Work," The Review of Financial Studies, Society for Financial Studies, vol. 31(5), pages 1605-1653.
    16. Christopher Cornwell & Ian M. Schmutte & Daniela Scur, 2021. "Building a Productive Workforce: The Role of Structured Management Practices," Management Science, INFORMS, vol. 67(12), pages 7308-7321, December.
    17. Scur, Daniela & Schmutte, Ian & Cornwell, Christopher, 2019. "Building a productive workforce: the role of structured management," CEPR Discussion Papers 13908, C.E.P.R. Discussion Papers.
    18. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    19. Andy Feng & Anna Valero, 2020. "Skill-Biased Management: Evidence from Manufacturing Firms," The Economic Journal, Royal Economic Society, vol. 130(628), pages 1057-1080.
    20. Scur, Daniela & Lemos, Renata, 2019. "The ties that bind: implicit contracts and management practices in family-run firms," CEPR Discussion Papers 13794, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Board of directors; Managers; Corporate governance; Productivity; Managerial practices;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:corfin:v:79:y:2023:i:c:s0929119922001912. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jcorpfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.