Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20292
Authors: 
Montmarquette, Claude
Rullière, Jean-Louis
Villeval, Marie-Claire
Zeiliger, Romain
Year of Publication: 
2004
Series/Report no.: 
IZA Discussion paper series 1057
Abstract: 
After a merger, company officials face the challenge of making compensation schemes uniform and of redesigning teams with managers from companies with different incentives, work habits and recruiting methods. In this paper, we investigate the relationship between executive pay and performance after a merger by dissociating the respective influence of shifts, which occur in both compensation incentives and team composition. The results of a real effort experiment conducted with managers within a large pharmaceutical company not only show that changes in compensation incentives affect performance but also suggest that the sorting effect of incentives in the previous companies impact cooperation and efficiency after the merger. Replicating this experiment with students showed differences in strategy rather than in substance between the two groups of subjects with managers appearing performance driven while students are more cost driven.
Subjects: 
executive and team-based compensation
subject pool effects
real effort experiment
incentives
sorting
mergers
JEL: 
C81
M52
J33
C92
Document Type: 
Working Paper

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