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Job-testing technologies enable firms to rely less on human judgment when making hiring decisions. Placing more weight on test scores may improve hiring decisions by reducing the influence of human bias or mistakes but may also lead firms to forgo the potentially valuable private information of their managers. We study the introduction of job testing across 15 firms employing low-skilled service sector workers. When faced with similar applicant pools, we find that managers who appear to hire against test recommendations end up with worse average hires. This suggests that managers often overrule test recommendations because they are biased or mistaken, not only because they have superior private information.

This paper revisits the relationship between firm performance and CEO turnover. Instead of classifying turnovers into forced and voluntary, we introduce performance-induced turnover, defined as turnover that would not have occurred had performance been “good.” We document a close turnover-performance link and estimate that 38%–55% of turnovers are performance induced. This is significantly more than the number of forced turnovers, though the two types of turnovers are highly correlated. Compared to the predictions of Bayesian learning models, learning about CEO ability appears to be slow, and boards act as if CEO ability (or match quality) was subject to frequent shocks.

We embed a field experiment in a nationwide recruitment drive for a new health care position in Zambia to test whether career benefits attract talent at the expense of prosocial motivation. In line with common wisdom, offering career opportunities attracts less prosocial applicants. However, the trade-off exists only at low levels of talent; the marginal applicants in treatment are more talented and equally prosocial. These are hired, and perform better at every step of the causal chain: they provide more inputs, increase facility utilization, and improve health outcomes including a 25 percent decrease in child malnutrition.

Gender differences in task allocations may sustain vertical gender segregation in labor markets. We examine the allocation of a task that everyone prefers be completed by someone else (writing a report, serving on a committee, etc.) and find evidence that women, more than men, volunteer, are asked to volunteer, and accept requests to volunteer for such tasks. Beliefs that women, more than men, say yes to tasks with low promotability appear as an important driver of these differences. If women hold tasks that are less promotable than those held by men, then women will progress more slowly in organizations.

This paper shows that CEOs are fired after bad firm performance caused by factors beyond their control. Standard economic theory predicts that corporate boards filter out exogenous industry and market shocks from firm performance before deciding on CEO retention. Using a hand-collected sample of 3,365 CEO turnovers from 1993 to 2009, we document that CEOs are significantly more likely to be dismissed from their jobs after bad industry and, to a lesser extent, after bad market performance. A decline in industry performance from the 90th to the 10th percentile doubles the probability of a forced CEO turnover.

We study the impact of directors with foreign experience on firm performance in emerging markets. Using a unique data set from China, we exploit the introduction of policies to attract talented emigrants and increase the supply of individuals with foreign experience in different provinces at different times. We document that performance increases after firms hire directors with foreign experience and identify the channels through which the emigration of talent may lead to a brain gain. Our findings provide evidence on how directors transmit knowledge about management practices and corporate governance to firms in emerging markets.

The best worker is not always the best candidate for manager. In these cases, do firms promote the best potential manager or the best worker in their current job? Using microdata on the performance of sales workers at 131 firms, we find evidence consistent with the Peter Principle, which proposes that firms prioritize current job performance in promotion decisions at the expense of other observable characteristics that better predict managerial performance. We estimate that the costs of promoting workers with lower managerial potential are high, suggesting either that firms are making inefficient promotion decisions or that the benefits of promotion-based incentives are great enough to justify the costs of managerial mismatch. We find that firms manage the costs of the Peter Principle by placing less weight on sales performance in promotion decisions when managerial roles entail greater responsibility and when frontline workers are incentivized by strong pay for performance.

This paper uses administrative data to analyze a large employer-borne payroll tax rate cut for young workers in Sweden. We find no effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, and a 2–3 percentage point increase in youth employment. Firms employing many young workers receive a larger tax windfall and expand right after the reform: employment, capital, sales, and profits increase. These effects appear stronger in credit-constrained firms. Youth-intensive firms also increase the wages of all their workers collectively, young as well as old, consistent with rent sharing of the tax windfall.

We show that economic conditions when managers enter the labor market have long-run effects on their career paths and managerial styles. Managers who began their careers during recessions become CEOs more quickly, but at smaller firms. They also have more conservative styles, such as lower investment in capital expenditures and research and development, more cost cutting, and lower leverage and working capital needs. These recession effects appear to be largely driven by the characteristics of the CEO's first job (recession CEOs tend to start in smaller or private firms), which suggests that the early work environment is important to the formation and selection of managers.

Both theory and empirical evidence suggest that managers’ career concerns can serve as an important source of implicit economic incentives. We examine how incentives for political promotion are related to compensation policy and firm performance in Chinese state-owned enterprises. We find that the likelihood that the CEO receives a political promotion is positively related to firm performance. We also find that CEOs with a higher likelihood of political promotion have lower pay levels and lower pay–performance sensitivity. Overall, the evidence suggests that competition in the political job market helps mitigate weak monetary incentives for CEOs in China. Data are available at https://doi.org/10.1287/mnsc.2017.2966 . This paper was accepted by Lauren Cohen, finance.