DP14334 Are Executives in Short Supply? Evidence from Deaths' Events

Author(s): Julien Sauvagnat, Fabiano Schivardi
Publication Date: January 2020
Keyword(s): Executives supply, firm performance, local growth
JEL(s): J24, M51, R11
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14334

Using exhaustive administrative data on Italian social security records, we construct measures of local labor market tightness for executives that vary by industry and location. We then show that firm performance is negatively affected by executives death, but only in thin local labor markets. Death events are followed by an increase in the separation rate for the other executives of the firm, in particular for those with a college degree. Consistent with the hypothesis that the drop in performance is due to the fact that executives are in short supply, we find that after a death event executives wages in other firms increase, but only in thin markets. This indicates that local policies aiming at boosting the supply of managerial skills might be effective at increasing firm performance.