After Class podcast: Beating earnings benchmarks and intrinsic motivations

- Especially for listed firms, there are many documented benefits of benchmark beating, according to Jeppe Christoffersen.

In his own research, there is also evidence that small owner-managed Danish private firms without debt and other external motivations beat earnings benchmarks. Christoffersen and his co-authors directly observed how owner-managers decrease their salaries to transform a loss into a profit.

- We wanted to understand the intrinsic motivations behind this seemingly irrational choice, he says.

Using Danish administrative datasets, Jeppe and his co-authors connected owner-manager’s marital status and financial data. Their results indicate that owner-managers who  beat earnings benchmarks are more likely to marry just before they turn 30.

Christoffersen thinks there are other private benchmarks that could explain firm behavior.
- If somebody has a private benchmark in mind that we can measure with administrative data, please let us know, he summarises.

Jeppe Christoffersen recently visited Hanken School of Economics and also the latest podcast After Class med Jesper & Dennis Opens in new window (in Swedish and Danish)