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Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies

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Joseph E. Stiglitz
Aaron S. Edlin

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Abstract

We argue here for a broader view of the biases in managers' decisions: In general, managerial rent-seeking affects not only the level of investment, but also the form. Our basic hypothesis is simple: given the now well-established scope for managerial discretion, managers have an incentive to exercise that discretion to enhance their income. Any managerial contract is subject to renegotiation, and a manager's pay is the outcome of an often bewildering bargaining process between management, the board of directors, and rival management teams or takeover artists.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4145.

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Date of creation: May 1997
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Publication status: published as American Economic Review, vol. 85, no.5, pp. 1301-1312, December 1995.
Handle: RePEc:nbr:nberwo:4145

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D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing

References listed on IDEAS
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  1. Bagwell, Laurie Simon & Zechner, Josef, 1993. " Influence Costs and Capital Structure," Journal of Finance, American Finance Association, vol. 48(3), pages 975-1008, July. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Gérard Charreaux, 1996. "Vers une théorie du gouvernement des entreprises," Working Papers FARGO 0960501, Université de Bourgogne - LEG/Fargo (Research center in Finance,organizational ARchitecture and GOvernance). [Downloadable!]
  2. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
  3. Gérard Charreaux, 1996. "Pour une véritable théorie de la latitude managériale et du gouvernement des entreprises," Working Papers FARGO 0960601, Université de Bourgogne - LEG/Fargo (Research center in Finance,organizational ARchitecture and GOvernance). [Downloadable!]
  4. Joseph E. Stiglitz, 1999. "Toward a General Theory of Wage and Price Rigidities and Economic Fluctuations," American Economic Review, American Economic Association, vol. 89(2), pages 75-80, May. [Downloadable!] (restricted)
  5. Hervé Alexandre & Mathieu Paquerot, 2000. "Efficacité des structures de contrôle et enracinement des dirigeants," Working Papers FARGO 1000601, Université de Bourgogne - LEG/Fargo (Research center in Finance,organizational ARchitecture and GOvernance). [Downloadable!]
    Other versions:
  6. Inderst, Roman & Mueller, Holger M, 2006. "CEO Compensation and Strategy Inertia," CEPR Discussion Papers 5713, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  7. Gérard Charreaux, 2000. "Le conseil d'administration dans les théories de la gouvernance," Working Papers FARGO 001201, Université de Bourgogne - LEG/Fargo (Research center in Finance,organizational ARchitecture and GOvernance), revised Dec 2000. [Downloadable!]
  8. Novaes, Walter & Zingales, Luigi, 2003. "Bureaucracy as a Mechanism to Generate Information," CEPR Discussion Papers 3945, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  9. Philippe Desbrières, 2002. "Les actionnaires salariés," Working Papers FARGO 1021101, Université de Bourgogne - LEG/Fargo (Research center in Finance,organizational ARchitecture and GOvernance). [Downloadable!]
  10. Anton Korinek & Joseph E. Stiglitz, 2008. "Dividend Taxation and Intertemporal Tax Arbitrage," NBER Working Papers 13858, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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