Speaker:
Viral Acharya
Leonard N. Stern School of Business, New York University
Discussant:
Luca Enriques
University of Oxford
Abstract
Paper Authors: Viral Acharya, Marco Pagano, and Paolo Volpin
We present a model where firms compete for scarce managerial talent (“alpha”) and managers are risk-averse. When managers cannot move across firms after being hired, employers learn about their talent, allocate them efficiently to projects and provide insurance to low-quality managers. When instead managers can move across firms, firm-level coinsurance is no longer feasible, but managers may self-insure by switching employer to delay the revelation of their true quality. However this results in inefficient project assignment, with lowquality managers handling too risky projects. The model has several empirical predictions and policy implications.
