A Market’s Reward Scheme, Media Attention, and the Transitory Success of Managerial Change
AbstractAgainst the background of growing media interest in professional soccer, this paper proposes a moral hazard model with costly state verification to explain how rule changes affecting the reward scheme of team performance impact on the success of managerial change. As has been shown recently based on four decades of data from the German soccer premiership by Wagner (2010), the incentive change in professional soccer leagues enacted by the FIFA in 1995/96 rendered the drastic measure of firing a coach a more efficient instrument in the clubs’ striving for success. In contrast to existing approaches, our model by accommodating the role of media interest is able to jointly explain (i) the impact of introducing an asymmetric reward scheme, (ii) of managerial turnover and (iii) of the perceived degree of ambition of a club on the athletic output of the team. It is shown that the rule change induces a higher agency cost, which is temporarily economized by clubs that change their management. This cost reducing effect temporarily enhances the efficiency of generating athletic output for top league clubs.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 232 (2012)
Issue (Month): 3 (May)
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Incentives; structural change; moral hazard; professional sports;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
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