Officially Transparent: Selective Monitoring in a Principal-Agent Relationship
Abstract
Firms monitor their employee performance to identify inefficiencies and boost productivity. A form of increased monitoring that firms engage in is the public release of employee performance through a transparency policy. We consider how employees react to the consistent public release of their performance. To do so, we analyze an environment wherein a firm withholds information that was meant to be released publicly. Exploiting omissions in the public reporting of referee evaluations by the National Basketball Association ("NBA"), we analyze how varying degrees of transparency affect agent behavior within the principal-agent relationship. Under full release of their performance, referees significantly decrease their whistle frequency. This effect persists when other variables related public scrutiny, like nationally televised or highly attended games, are included. We find no change in agent behavior in games where the NBA selectively releases referee performance. Our results suggest full monitoring, and not selective monitoring, induces changes to agent behavior.