Prof. Jan Bouwens (University of Amsterdam)

Program

Date: April 16, 2019

Time: 17.00 - 18.30 hrs

Place: Schackstraße 4, 314

Title: Adding controls: Do junior managers respond the same as senior managers?

Abstract

We study, in a construction firm, whether and how project managers who are initially evaluated on their project profitability respond to the introduction of an additional performance measure: working capital levels. Our prediction is that project managers, conditional on their seniority, will respond differently to the new policy. The decision to add the specific performance measure of working capital in addition to the profit measure serves as a natural experiment to test how project managers respond when facing a new condition the firm creates. We predict and document that senior project managers will resist the introduction of the new performance measure, as it infringes on the implicit contract between them and the principal. Our empirical results suggest that senior project managers reject the new performance measure, while junior project managers accept it.