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When Promotions Induce Good Managers to Be Lazy

Author

Listed:
  • Antoine Renucci
  • Frédéric Loss

Abstract

This paper shows that when being perceived as a good manager is a necessary condition to be promoted, a priori talented managers may undertake excessively risky projects. Indeed, such a choice renders more difficult the updating of beliefs process regarding their actual types. In turn, good managers are induced to lower the level of effort they perform since the extent to which effort impacts the perception the market has about their talent is lessened. This adversely impacts the firms' profits. Hence, career concerns do not discipline good managers in our context. However, we show how employers can limit managerial slack by increasing monitoring

Suggested Citation

  • Antoine Renucci & Frédéric Loss, 2004. "When Promotions Induce Good Managers to Be Lazy," Econometric Society 2004 North American Winter Meetings 263, Econometric Society.
  • Handle: RePEc:ecm:nawm04:263
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    File URL: http://repec.org/esNAWM04/up.24176.1048937347.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Promotions; career concerns; choice of risk; monitoring by corporate owners;
    All these keywords.

    JEL classification:

    • D - Microeconomics
    • D - Microeconomics

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