Advanced Search
MyIDEAS: Login to save this paper or follow this series

When Promotions Induce Good Managers to Be Lazy

Contents:

Author Info

  • Renucci, Antoine
  • Loss, Frédéric

Abstract

In our context, a good-reputation manager favors risk when being perceived as good allows to be promoted while risk is observable but not verifiable. Indeed, it renders more difficult the learning process regarding her talent. In turn, this lowers her level of effort since the extent to which effort impacts the perception the market has about her talent is lessened. We show how and when monitoring helps employers restore incentives to work. By contrast, career concerns discipline a bad-reputation manager in our context, provided that promotions are sufficiently attractive. These results hold when two managers of heterogeneous reputation compete for one position.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/4126/1/cereg200412.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/4126.

as in new window
Length:
Date of creation: 2004
Date of revision:
Publication status: Published in Cahiers de recherche Cereg, 2004
Handle: RePEc:dau:papers:123456789/4126

Contact details of provider:
Web page: http://www.dauphine.fr/en/welcome.html
More information through EDIRC

Related research

Keywords: Firm Employment Decisions; Promotions; Labor Productivity; Project Analysis;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Scharfstein, David S & Stein, Jeremy C, 1990. "Herd Behavior and Investment," American Economic Review, American Economic Association, American Economic Association, vol. 80(3), pages 465-79, June.
  2. Gibbons, R. & Murphy, K.J., 1990. "Optimal Incentive Contracts In The Presence Of Career Concerns: Theory And Evidence," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 563, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Bernhardt, Dan, 1995. "Strategic Promotion and Compensation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 62(2), pages 315-39, April.
  4. Edward P. Lazear & Sherwin Rosen, 1979. "Rank-Order Tournaments as Optimum Labor Contracts," NBER Working Papers 0401, National Bureau of Economic Research, Inc.
  5. Green, Jerry & Stokey, Nancy, 1983. "A Comparison of Tournaments and Contracts," Scholarly Articles 3203644, Harvard University Department of Economics.
  6. Chevalier, Judith & Ellison, Glenn, 1997. "Risk Taking by Mutual Funds as a Response to Incentives," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(6), pages 1167-1200, December.
  7. Busse, Jeffrey A., 2001. "Another Look at Mutual Fund Tournaments," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 36(01), pages 53-73, March.
  8. Rosen, Sherwin, 1988. "Transactions Costs and Internal Labor Markets," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 4(1), pages 49-64, Spring.
  9. Bruno Biais & Catherine Casamatta, 1999. "Optimal Leverage and Aggregate Investment," Journal of Finance, American Finance Association, American Finance Association, vol. 54(4), pages 1291-1323, 08.
  10. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(4), pages 828-62, August.
  11. Peter Diamond, 1998. "Managerial Incentives: On the Near Linearity of Optimal Compensation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(5), pages 931-957, October.
  12. Hermalin, Benjamin E, 1993. "Managerial Preferences Concerning Risky Projects," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 9(1), pages 127-35, April.
  13. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
  14. DeMarzo, Peter M & Duffie, Darrell, 1995. "Corporate Incentives for Hedging and Hedge Accounting," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 8(3), pages 743-71.
  15. Dewatripont, Mathias & Jewitt, Ian & Tirole, Jean, 1999. "The Economics of Career Concerns, Part I: Comparing Information Structures," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 66(1), pages 183-98, January.
  16. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 3(4), pages 305-360, October.
  17. Goriaev, Alexei P. & Palomino, Frédéric & Prat, Andrea, 2001. "Mutual Fund Tournament: Risk Taking Incentives Induced By Ranking Objectives," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2794, C.E.P.R. Discussion Papers.
  18. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 88(2), pages 288-307, April.
  19. Shavell, Steven, 1979. "On Moral Hazard and Insurance," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 93(4), pages 541-62, November.
  20. Prendergast, Canice & Stole, Lars, 1996. "Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(6), pages 1105-34, December.
  21. Jensen, M.C. & Murphy, K.J., 1988. "Performance Pay And Top Management Incentives," Papers, Rochester, Business - Managerial Economics Research Center 88-04, Rochester, Business - Managerial Economics Research Center.
  22. Zwiebel, Jeffrey, 1995. "Corporate Conservatism and Relative Compensation," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(1), pages 1-25, February.
  23. Malcomson, James M, 1984. "Work Incentives, Hierarchy, and Internal Labor Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(3), pages 486-507, June.
  24. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, Econometric Society, vol. 43(3), pages 455-68, May.
  25. Antoine Renucci & Frederic Loss, 2002. "The Fallacy of New Business Creation as a Disciplining Device for Managers," FMG Discussion Papers, Financial Markets Group dp398, Financial Markets Group.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:dau:papers:123456789/4126. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alexandre Faure).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.