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Unlikely sabotage: Comment on Bloomfield, Marvão, and Spagnolo

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  • Karpoff, Jonathan M.

Abstract

Bloomfield, Marvão, and Spagnolo (2023) establish an interesting yet puzzling finding: Firms in concentrated industries that form cartels are more likely to use relative performance evaluation (RPE) compensation arrangements for their top managers. The paper interprets this as evidence that cartel members constrain managers' incentives to engage in costly sabotage when their compensation depends on their peer firms' performance. I argue that successful costly sabotage to gain an RPE advantage is extremely unlikely and that costly sabotage is more likely among cartel firms than non-cartel firms. It therefore is an unlikely explanation of the paper's main finding. I propose an alternative explanation, that RPE benchmarks include firms that are not cartel member firms.

Suggested Citation

  • Karpoff, Jonathan M., 2023. "Unlikely sabotage: Comment on Bloomfield, Marvão, and Spagnolo," Journal of Accounting and Economics, Elsevier, vol. 76(2).
    • Handle: RePEc:eee:jaecon:v:76:y:2023:i:2:s0165410123000307
    DOI: 10.1016/j.jacceco.2023.101606
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    More about this item

    Keywords

    Sabotage; Predation; Cartels; Relative performance evaluation;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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