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Bureaucracy as a Mechanism to Generate Information

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  • Walter Novaes
  • Luigi Zingales

Abstract

Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labeled bureaucratic' and inefficient. This paper argues that the thin line between efficient management practices and inefficient bureaucracy is crossed to curb managerial agency costs in a multi-layer hierarchy. The model predicts that bureaucracy increases with the frequency of managerial turnover, and it establishes a link between bureaucracy, incentive schemes, and leverage in a cross-section of firms.

Suggested Citation

  • Walter Novaes & Luigi Zingales, 2003. "Bureaucracy as a Mechanism to Generate Information," NBER Working Papers 9763, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:9763
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    Cited by:

    1. Rajan, Raghuram & Zingales, Luigi, 2003. "Banks and Markets: the Changing Character of European Finance," CEPR Discussion Papers 3865, C.E.P.R. Discussion Papers.
    2. Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2009. "Banks, Distances and Firms' Financing Constraints," Review of Finance, European Finance Association, vol. 13(2), pages 261-307.
    3. Alessandrini, Pietro & Calcagnini, Giorgio & Zazzaro, Alberto, 2008. "Asset restructuring strategies in bank acquisitions: Does distance between dealing partners matter?," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 699-713, May.
    4. Biondi Yuri, 2011. "The Pure Logic of Accounting: A Critique of the Fair Value Revolution," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 1(1), pages 1-49, January.
    5. Makris, Miltiadis, 2009. "Incentives for motivated agents under an administrative constraint," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 428-440, August.
    6. Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2009. "Geographical Organization of Banking Systems and Innovation Diffusion," Springer Books, in: Alberto Zazzaro & Michele Fratianni & Pietro Alessandrini (ed.), The Changing Geography of Banking and Finance, edition 1, chapter 0, pages 75-108, Springer.
    7. Andrea Bellucci & Alexander Borisov & Alberto Zazzaro, 2011. "Do Male and Female Loan Officers Differ in Small Business Lending? A Review of the Literature," Contributions to Economics, in: Giorgio Calcagnini & Ilario Favaretto (ed.), The Economics of Small Businesses, chapter 0, pages 195-219, Springer.
    8. Nicholas Bloom & John Van Reenen, 2007. "Measuring and Explaining Management Practices Across Firms and Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(4), pages 1351-1408.
    9. Thomas Hellmann & Enrico Perotti, 2011. "The Circulation of Ideas in Firms and Markets," Management Science, INFORMS, vol. 57(10), pages 1813-1826, October.
    10. Pietro Alessandrini & Andrea F. Presbitero & Alberto Zazzaro, 2010. "Bank size or distance: what hampers innovation adoption by SMEs?," Journal of Economic Geography, Oxford University Press, vol. 10(6), pages 845-881, November.
    11. Luigi Zingales, 2000. "In Search of New Foundations," Journal of Finance, American Finance Association, vol. 55(4), pages 1623-1653, August.
    12. repec:ctc:sdimse:dime19_01 is not listed on IDEAS
    13. Pietro ALESSANDRINI & Andrea PRESBITERO & Alberto ZAZZARO, 2006. "Banks, Distances and Financing Constraints for Firms," Working Papers 266, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    14. Elazar Berkovitch & Ronen Israel & Yossef Spiegel, 2000. "Managerial Compensation and Capital Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 549-584, December.
    15. Pietro ALESSANDRINI & Giorgio CALCAGNINI & Alberto ZAZZARO, 2006. "Asset Restructuring Strategies in Bank Acquisitions: Evidence from the Italian Banking Industry," Working Papers 264, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    16. Andersson, Fredrik, 2004. "A Trickle-Down Theory of Incentives with Applications to Privatization and Outsourcing," Working Papers 2004:13, Lund University, Department of Economics.
    17. Klerman, Daniel & Mahoney, Paul G., 2007. "Legal origin?," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 278-293, June.
    18. Jose Maria Liberti, 2004. "Initiative, Incentives and Soft Information. How Does Delegation Impact The Role of Bank Relationship Managers?," Finance 0404023, University Library of Munich, Germany.

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    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • G3 - Financial Economics - - Corporate Finance and Governance

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