Grade non-disclosure agreements

I had never heard of those, but it turns out they are common at top business schools.  Egads!  Here are some results:

We study the effects of grade non-disclosure (GND) policies implemented within MBA programs at highly ranked business schools. GND precludes students from revealing their grades and grade point averages (GPAs) to employers. In the labor market, we find that GND weakens the positive relation between GPA and employer desirability. During the MBA program, we find that GND reduces students’ academic effort within courses by approximately 4.9%, relative to comparable students not subject to the policy. Consistent with our model, in which abilities are potentially correlated and students can substitute effort towards other activities in order to signal GPA-related ability, students participate in more extracurricular activities and enroll in more difficult courses under GND. Finally, we show that students’ tenure with their first employers after graduation decreases following GND.

That is from a new paper by Eric Floyd, Sorabh Tomar, and Daniel Lee, via the excellent Kevin Lewis.

What is exactly the right way to model this practice?  If you believe in the signaling model of MBA education, is this an attempt to game the signal and avoid zero-sum comparisons?  Can that boost the overall aggregate value of the signal?

Or maybe you believe the MBA is a mix of learning/networking and signaling.  You want to encourage more learning at the margin, without the person having to incur a signaling penalty through some lower grades.

Or does this simply show that top prospective MBA students hold the bargaining power, and these arrangements help recruiting by making life easier for those students?

What else?  Here are other readings on the practice.  Where adopted, the policies seem quite popular with students.  And the policies do not restrict showing the grades to other schools, though perhaps for MBAs that is not so relevant?


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