Corporate Conservatism and Relative Compensation
This paper demonstrates that, in a simple setting with managerial concern for reputation and asymmetric information on ability, most managers may refrain from undertaking innovations that stochastically dominate an industry standard. Common components of uncertainty lead to market inferences of managerial ability based on relative performance. Managers who undertake the industry standard are consequently evaluated with a more accurate benchmark than those innovating. Discontinuities in compensation when performance is low lead managers to have differing valuations of an accurate benchmark, depending on type. In particular, very high and very low ability managers are more likely to undertake superior innovations than those of average ability. Copyright 1995 by University of Chicago Press.
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- Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992.
"The impact of institutional trading on stock prices,"
Journal of Financial Economics,
Elsevier, vol. 32(1), pages 23-43, August.
- Lakonishok, Josef & Shleifer, Andrei & Vishny, Robert W., 1992. "The impact of institutional trading on stock prices," Scholarly Articles 27692662, Harvard University Department of Economics.
- Warner, Jerold B. & Watts, Ross L. & Wruck, Karen H., 1988. "Stock prices and top management changes," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 461-492, January.
- N/A, 1980. "Chapter I. Industrial Production," National Institute Economic Review, National Institute of Economic and Social Research, vol. 93(1), pages 7-19, August.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
- Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
- N/A, 1980. "Chapter IV. Industrial Production," National Institute Economic Review, National Institute of Economic and Social Research, vol. 91(1), pages 68-77, February.
- Rosen, Sherwin, 1981. "The Economics of Superstars," American Economic Review, American Economic Association, vol. 71(5), pages 845-858, December. Full references (including those not matched with items on IDEAS)
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