Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/92467
Authors: 
Pavan, Alessandro
Garrett, Daniel
Year of Publication: 
2010
Series/Report no.: 
CSIO Working Paper 0105
Abstract: 
We characterize a firm's profit-maximizing turnover policy in an environment where managerial productivity changes stochastically over time and is the managers' private information. Our key positive result shows that the productivity level that the firm requires for retention declines with the managers' tenure in the firm. Our key normative result shows that, compared to what is efficient, the profit-maximizing policy either induces excessive retention (i.e., inefficiently low turnover) at all tenure levels, or excessive firing at the early stages of the relationship followed by excessive retention after sufficiently long tenure.
Subjects: 
managerial turnover
termination clauses
dynamic mechanism design
adverse selection
moral hazard
JEL: 
D82
Document Type: 
Working Paper

Files in This Item:
File
Size
401.32 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.