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

Agency, Firm Growth, and Managerial Turnover

Contents:

Author Info

  • Ronald W. Anderson
  • M. Cecilia Bustamante
  • Stéphane Guibaud
Registered author(s):

    Abstract

    We study managerial incentive provision under moral hazard in a firm subject to stochastic growth opportunities. In our model, managers are dismissed after poor performance, but also when an alternative manager is more capable of growing the firm. The optimal contract may involve managerial entrenchment, such that growth opportunities are foregone after good performance. Firms with better growth prospects have higher managerial turnover and more front-loaded compensation. Firms may pay severance to incentivize their managers to report truthfully the arrival of growth opportunities. By ignoring the externality of the dismissal policy onto future managers, the optimal contract implies excessive retention.

    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://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/dp711.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp711.

    as in new window
    Length:
    Date of creation: Sep 2012
    Date of revision:
    Handle: RePEc:fmg:fmgdps:dp711

    Contact details of provider:
    Web page: http://www.lse.ac.uk/fmg/

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    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. Daniel Garrett & Alessandro Pavan, 2010. "Managerial Turnover in a Changing World," Discussion Papers 1490, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    2. Casamatta, Catherine & Guembel, Alexander, 2007. "Managerial Legacies, Entrenchment and Strategic Inertia," IDEI Working Papers 442, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Eisfeldt, Andrea L. & Kuhnen, Camelia M., 2013. "CEO turnover in a competitive assignment framework," Journal of Financial Economics, Elsevier, vol. 109(2), pages 351-372.
    4. Bruno Biais & Thomas Mariotti & Guillaume Plantin & Jean-Charles Rochet, 2007. "Dynamic Security Design: Convergence to Continuous Time and Asset Pricing Implications," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 345-390.
    5. Bruno Biais & Thomas Mariotti & Jean-Charles Rochet & StÈphane Villeneuve, 2010. "Large Risks, Limited Liability, and Dynamic Moral Hazard," Econometrica, Econometric Society, vol. 78(1), pages 73-118, 01.
    6. repec:bla:restud:v:74:y:2007:i:2:p:345-390 is not listed on IDEAS
    7. Biais, Bruno & Mariotti, Thomas & Plantin, Guillaume & Rochet, Jean Charles, 2004. "Dynamic Security Design," CEPR Discussion Papers 4753, C.E.P.R. Discussion Papers.
    8. Dirk Jenter & Katharina Lewellen, 2011. "CEO Preferences and Acquisitions," NBER Working Papers 17663, National Bureau of Economic Research, Inc.
    9. Anderson, Ronald W & Nyborg, Kjell G, 2001. "Financing and Corporate Growth under Repeated Moral Hazard," CEPR Discussion Papers 2920, C.E.P.R. Discussion Papers.
    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:fmg:fmgdps:dp711. 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: (The FMG Administration).

    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.