On May 2, 2024, presenter Kelly Shue discussed “Incentives and Promotions”. The lecture was moderated by Mila Sherman.
Kelly answers attendee questions in the above video and a few more below:
Promoting the best worker is not necessarily a mistake on the part of firms. While we show that promoting based on past performance has significant costs, there are also significant benefits in terms of motivating workers to exert effort and invest in firm specific human capital.
[2] Could it be that potential is assessed at a time when participants often have young children, which can lead to lower assessed potential especially for women who are usually more involved in child rearing at the time when their “potential” is assessed. If possible, it would be helpful to look at men and women without children to figure out if this effect is (partly) driving the results. Is this captured by your “demographics” controls? This would be consistent with recent studies of the gender pay gap which find no gender gap straight out of school (say law school) but a widening gap later on.
Please see our draft, which includes a careful breakdown of gaps by age. We think there definitely could be a child care component. However, we continue to see a large gap in assessments of potential and promotions even among older workers who are unlikely to be caring for young children, and for promotions that don’t require relocation or a large increase in responsibilities.
Publicly accessible versions of the research Kelly presented can be found here with detailed discussions and analysis of many of the topics raised in the Q&A.
Kelly Shue’s academic interests lie at the intersection of behavioral economics and empirical corporate finance. Her research has explored the Peter Principle, compensation and promotions, gender and negotiations, the gambler’s fallacy, contrast effects and non-proportional thinking in asset pricing, and executive social networks. Her research has been featured in numerous news outlets including CNN, NPR, and the Wall Street Journal, and has been awarded the AQR Insight Award, the Wharton School-WRDS Award for Best Empirical Finance Paper, and the UBS Global Asset Management Award for Research in Investments. She serves as an associate editor at the Journal of Finance and Journal of Financial Economics, and previously served as an editor at the Review of Finance. Before joining Yale, Professor Shue taught MBA Corporate Finance at the University of Chicago, Booth School of Business.
For more information on the webinar please contact Professor Jun Yang, Director of the Institute for Corporate Governance at icg@indiana.edu.
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