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Information Frictions, Monitoring Costs and the Market for CEOs

Abstract This paper discusses the matching between CEOs of different talent and firms of different size, by considering boards' costly monitoring of CEOs who have private information about firm output. By incorporating a costly state verification model into a matching model, we have a number of novel findings. First, positive assortative matching (PAM) breaks down as larger firms match with less talented CEOs when monitoring is sufficiently costly despite of complementarity in firms' production technology. More importantly, PAM can be the equilibrium sorting pattern for large firms and high talent CEOs even it fails for small firms and low talent CEOs, which implies that empirical applications relying on PAM are more robust by using samples ... (more)
Created Date 2015
Contributor Li, Zhan (Author) / Chade, Hector (Advisor) / Kovrijnykh, Natalia (Committee member) / Manelli, Alejandro (Committee member) / Arizona State University (Publisher)
Subject Economics
Type Doctoral Dissertation
Extent 51 pages
Language English
Reuse Permissions All Rights Reserved
Note Doctoral Dissertation Economics 2015
Collaborating Institutions Graduate College / ASU Library
Additional Formats MODS / OAI Dublin Core / RIS

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Description Dissertation/Thesis