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Enterprise Performance and Managers' Profiles

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  • Simeon Djankov

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  • Stijn Claessens

Abstract

We study the effect of changes in management and the use of equity incentives on firm performance and market valuation using a cross-section of 706 Czech firms over the 1993-97 period. As these firms have exogenously determined ownership structures, we avoid the simultaneity problem often present in studies for transition economies where either existing managers become owners or new owners replace existing managers. And, as there were few managers in the Czech Republic with market-economy skills, we avoid the selection problem often present in studies for market economies where new managers may be better suited than existing managers to manage the firm. Controlling also for initial conditions and sector-specific effects, we find that several measures of enterprise performance are positively related with the entry of new managers, particularly if those managers were selected by private owners (rather than by the government). Equity holdings by managers appear to have no effect on corporate performance. The results suggest that changes in human capital are more important in bringing about improvements in corporate performance than equity incentives.

Suggested Citation

  • Simeon Djankov & Stijn Claessens, 1997. "Enterprise Performance and Managers' Profiles," William Davidson Institute Working Papers Series 115, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:1997-115
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    File URL: http://deepblue.lib.umich.edu/bitstream/2027.42/39505/3/wp115.pdf
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    Cited by:

    1. Iwasaki, Ichiro & Kočenda, Evžen, 2017. "Are some owners better than others in Czech privatized firms? Even meta-analysis can’t make us perfectly sure," Economic Systems, Elsevier, vol. 41(4), pages 537-568.

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