TY  - JOUR
AU  - Acharya,Viral V.
AU  - Pagano,Marco
AU  - Volpin,Paolo
TI  - Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18891
PY  - 2013
Y2  - March 2013
UR  - http://www.nber.org/papers/w18891
L1  - http://www.nber.org/papers/w18891.pdf
N1  - Author contact info:
Viral V. Acharya
Stern School of Business
New York University
44 West 4th Street, Suite 9-84
New York, NY 10012
Tel: 212/998-0354
Fax: 212 995 4233
E-Mail: vacharya@stern.nyu.edu

Marco Pagano
Department of Economics
University of Naples Federico II
Via Cintia, Monte S. Angelo
80126 Napoli,  ITALY
Tel: +390815752508
Fax: +390815752243
E-Mail: mrpagano@tin.it

Paolo Volpin
Finance Department
London Business School
Regent's Park, London NW1 4SA, UK
E-Mail: pvolpin@london.edu
AB  - We present a model in which managers are risk-averse and firms compete for scarce managerial talent (“alpha”). When managers are not mobile across firms, firms provide efficient compensation, which allows for learning about managerial talent and for insurance of low-quality managers. When instead managers can move across firms, firms cannot offer co-insurance among employees. In anticipation, risk-averse managers may churn across firms or undertake aggregate risks in order to delay the revelation of their true quality. The result is excessive risk-taking with pay for short-term performance and an accumulation of long-term risks. We conclude with a discussion of policies to address the inefficiency in compensation.
ER  -