Institutional Affiliation: IDC Herzliya
NBER Working Papers and Publications
|June 2018||Termination Risk and Agency Problems: Evidence from the NBA|
with Alma Cohen, Roy Sasson: w24708
When organizational structures and contractual arrangements face agents with a significant risk of termination in the short term, such agents may under-invest in projects whose results would be realized only in the long term. We use NBA data to study how risk of termination in the short term affects the decision of coaches. Because letting a rookie play produces long-term benefits on which coaches with a shorter investment horizon might place lower weight, we hypothesize that higher termination risk might lead to lower rookie participation. Consistent with this hypothesis, we find that, during the period of the NBA’s 1999 collective bargaining agreement (CBA) and controlling for the characteristics of rookies and their teams, higher termination risk was associated with lower rookie partici...
Published: Alma Cohen & Nadav Levy & Roy Sasson, 2018. "Termination Risk and Agency Problems: Evidence from the NBA," Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(4), pages 579-618. citation courtesy of