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Managerial ability and success: Evidence from the career paths of film directors

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  • John, Kose
  • Ravid, S. Abraham
  • Sunder, Jayanthi

Abstract

We use a unique hand-collected data set covering the entire career path of film directors, who are re-hired (or not) after each and every film project. Film directors manage projects which can cost hundreds of millions of dollars. We examine the inter-temporal dynamics of turnover decisions to disentangle ability revelation from effort incentives and measure the contribution of project managers to project success. We show that the probability of re-hiring is increasing in average returns over an entire career path, rather than just the outcome of the most recent project, supporting an ability revelation interpretation. We also find that promotions are increasing in directors' experience. We create an ability measure for directors, and show that directors can have a significant effect on the financial and critical success of their projects. Our evidence can inform the debate on CEO effects on their firms and projects and contribute to the CEO and executive turnover literature.

Suggested Citation

  • John, Kose & Ravid, S. Abraham & Sunder, Jayanthi, 2017. "Managerial ability and success: Evidence from the career paths of film directors," Journal of Corporate Finance, Elsevier, vol. 44(C), pages 425-439.
    • Handle: RePEc:eee:corfin:v:44:y:2017:i:c:p:425-439
    DOI: 10.1016/j.jcorpfin.2014.11.001
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    1. Georgios Alaveras & Estrella Gomez-Herrera & Bertin Martens, 2018. "Cross-border circulation of films and cultural diversity in the EU," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(4), pages 645-676, November.
    2. Fei Peng & Lili Kang & Sajid Anwar & Xue Li, 2019. "Star power and box office revenues: evidence from China," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 43(2), pages 247-278, June.
    3. Shu Han & S. Abraham Ravid, 2020. "Star Turnover and the Value of Human Capital—Evidence from Broadway Shows," Management Science, INFORMS, vol. 66(2), pages 958-978, February.
    4. Thorsten Hennig-Thurau & S. Abraham Ravid & Olav Sorenson, 2021. "The Economics of Filmed Entertainment in the Digital Era," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 45(2), pages 157-170, June.
    5. Venkat Kuppuswamy & Peter Younkin, 2020. "Testing the Theory of Consumer Discrimination as an Explanation for the Lack of Minority Hiring in Hollywood Films," Management Science, INFORMS, vol. 66(3), pages 1227-1247, March.
    6. Lin, Feng-Yi & Guan, Liming & Ho, Chia-Ling & Wang, Teng-Shih, 2022. "Examining the D&O insurance effect on managerial ability," Finance Research Letters, Elsevier, vol. 46(PA).
    7. Raoul Kübler & Rouven Seifert & Michael Kandziora, 2021. "Content valuation strategies for digital subscription platforms," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 45(2), pages 295-326, June.
    8. Bui, Dien Giau & Chen, Yehning & Chen, Yan-Shing & Lin, Chih-Yung, 2023. "Managerial ability and financial statement disaggregation decisions," Journal of Empirical Finance, Elsevier, vol. 74(C).
    9. Lee Yoong Hon & Ruth Lim Sheau Yen, 2018. "At the Movies: Some Stylized Facts on Investment Returns and Consumption Patterns," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 17(2), pages 123-142, September.
    10. Jordi McKenzie, 2023. "The economics of movies (revisited): A survey of recent literature," Journal of Economic Surveys, Wiley Blackwell, vol. 37(2), pages 480-525, April.
    11. Darren Filson & James H. Havlicek, 2018. "The performance of global film franchises: installment effects and extension decisions," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 42(3), pages 447-467, August.
    12. Grove, Wayne A. & Jetter, Michael & Papps, Kerry L., 2021. "Career lotto? Labor supply in a superstar market," Journal of Economic Behavior & Organization, Elsevier, vol. 183(C), pages 362-376.

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