The Influence of Managers on Their Business-Units' Performance

Abstract

This paper investigates whether and how managers affect their business-unit's performance. Although it is often assumed that managers can exert idiosyncratic influence on their business-units' performance, this is neither theoretically consistent nor empirically tested. Using proprietary archival data from a bakery firm, DONQ Co., LTD., I estimate the shop managers' effect on the units' performance and find them to be statistically and economically significant. I further show that the estimated manager-specific effects are associated with their career and age.