External vs Internal Monitors: The Role of Restructuring Consequences and Information Technologies
This paper analyses the relative efficiency of internal and external monitors. It confirms the intuition that, if the principal and her employees share aligned interests, internal monitoring is superior to external monitoring; vice versa if interests diverge. This result is not robust for two alternative information technologies considered. If monitoring effort affects the frequency instead of the accuracy of produced signals, the optimal monitoring mode depends on the contingency policy that is adopted in case monitoring fails. If, by contrast, the obtained signals are nonverifiable, then internal monitoring is weakly dominant.
|Date of creation:||Jul 1998|
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References listed on IDEAS
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- Aghion, Philippe & Tirole, Jean, 1997. "Formal and Real Authority in Organizations," Journal of Political Economy, University of Chicago Press, vol. 105(1), pages 1-29, February.
- Roland Strausz, 1997.
"Delegation of Monitoring in a Principal-Agent Relationship,"
Review of Economic Studies,
Oxford University Press, vol. 64(3), pages 337-357.
- Strausz, R.G., 1995. "Delegation of Monitoring in a Principal-Agent Relationship," Discussion Paper 1995-60, Tilburg University, Center for Economic Research.
- Jacques Crémer, 1995. "Arm's Length Relationships," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 275-295. Full references (including those not matched with items on IDEAS)
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