Manager preferences, goal setting and firm performance: Insights from a randomized field experiment

An emerging strand of literature suggests that managers matter. Bertrand and Schoar (2003) focus on managerial fixed effects in driving corporate policies. Other studies explore the link between managerial overconfidence and firm behavior (Malmendier and Tate, 2005, 2008); and between CEO’s characteristics in private equity firms with outcome success (Kaplan, Klebanov, and Sorensen, 2010). Along this line, we aim to explore the two following related questions. The first question focuses on the link between manager’s preferences i.e., risk and time preferences and firm’s performance. Specifically, we want to know whether the manager’s tendency to deviate from rationality i.e., manager’s behavioral problems due to loss aversion and present bias have a negative impact on firm’s performance. Our second question examines whether providing managers with simple intervention to address their behavioral problems would improve firm’s performance.