SAFE Visitors Program joint with Finance BB Seminar: Anjan Thakor (Washington University in St. Louis)
Speaker: Anjan Thakor (John E. Simon Professor of Finance, Olin School of Business, Washington University in St. Louis)
Title: Higher Purpose, Incentives and Economic Performance (joint with Robert E. Quinn)
We develop a model of organizational higher purpose and show that it dissipates agency frictions and elicits higher employee effort. The effect on profits depends on the relationship between the higher-purpose utilities of leaders and employees. With positively associated utilities, firm profit is non-monotonic in the commitment to higher purpose; otherwise, profit declines with the commitment to purpose. Agency costs of external finance in some firms crowd out higher-purpose investments by other firms, with profits nonincreasing in higher-purpose investments cross-sectionally. Moreover, higher external financing costs and uncertainty about how much employees’ higher-purpose utilities both reduce higher-purpose investments.
Registration is not required!