Shue (2011)
Revision as of 00:01, 22 May 2012 by imported>Moshe (→How the Author Tested Hypothesis)
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Contents
Author's Hypothesis
Executive social interactions are important determinants of managerial decision making and firm policies. The author tests to see if executive and firm outcomes are more similar among section peers than among class peers using data from HBS MBA students.
How the Author Tested Hypothesis
- The author adds additional structure of a linear in means model. The model is specified as:
- [math]Y_{isc}=\theta\bar Y_{sc} + \phi\bar v_{sc} + \alpha_{sc} + \rho_{isc}[/math]
The individual outcomes ([math]Y_{isc}[/math] either compensation or acquisitions are effected by both mean group outcomes [math]\bar Y_{sc}[/math] and mean group fundamentals [math]\bar v_{sc}[/math]
What Tests Achieved
He finds strong evidence of peer effects in executive compensation and acquisitions. Under the linear in means model he estimates a lower bound of elasticity of individual outcomes of 10%-20%.
