Career Concerns and Managerial Risk Taking: Evidence from the National Football League

About the seminar topic

Risky decisions in organisations may be distorted away from profit maximisation if managers care about their reputation, such as the public perceptions of their ability. Because reputation is hard to measure, documenting such distortions is difficult in most contexts. We provide evidence that the decision-making of head coaches in the National Football League (NFL) is distorted by reputation concerns. Using sentiment analysis on text data from millions of coach-related posts on Twitter, we construct a high-frequency reputation measure and show that it is predictive of coach dismissals. We link this reputation measure to coaches’ decisions whether to attempt 4th down conversions, a routinely made in-game choice involving risk, and use machine learning to predict how both win probabilities and sentiments would change depending on the decision. We show that coaches’ decisions respond not only to expected win probabilities but also to expected reputation changes. The evidence is consistent with a model of career concerns in which coaches have private information about conversion probabilities, generating conservatism in decision-making.

Speaker bio

Florian Schuett is a Professor at KU Leuven and Associate Professor at Tilburg University. His research is predominantly in applied microeconomic theory, with a focus on industrial organisation. In particular, he uses the tools of game theory and information economics to study the design of the patent systems.

No registration required

No registration required. If you have any questions about this seminar, please email Emily Brown.