Contracting with a quiet life manager
AbstractThe aim of this paper is to analyze how employees may affect firm's corporate governance. In particular, we analyze a shareholder-manager relationship through a principal-agent framework. The manager is the agent in charge of taking decisions for firm's success. Yet, when deciding, the manager takes into account employees' preferences, i.e. the manager wants to enjoy a "quiet life". Our result highlight that having a quiet-life manager is not necessarily linked to destroy value, as suggested in recent research. It might even recover part of the efficient decisions (at a cost borne by the shareholder).
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Bibliographic InfoPaper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 07.19.
Length: 25 pages
Date of creation: Dec 2007
Date of revision:
Quiet-life bias; Corporate Governance; Moral Hazard;
Find related papers by JEL classification:
- L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
- M14 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Corporate Culture; Social Responsibility
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-08 (All new papers)
- NEP-BEC-2007-12-08 (Business Economics)
- NEP-PPM-2007-12-08 (Project, Program & Portfolio Management)
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