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Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies

  • Joseph E. Stiglitz
  • Aaron S. Edlin

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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File URL: http://www.nber.org/papers/w4145.pdf
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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: Aug 1992
Date of revision:
Publication status: published as American Economic Review, vol. 85, no.5, pp. 1301-1312, December 1995.
Handle: RePEc:nbr:nberwo:4145
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Web page: http://www.nber.org
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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.
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