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Bureaucracy as a Mechanism to Generate Information

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Listed author(s):
  • 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.

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File URL: http://www.nber.org/papers/w9763.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9763.

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Date of creation: Jun 2003
Publication status: published as Novaes, Walter and Luigi Zingales. "Bureaucracy as a Mechanism to Generate Information." RAND Journal of Economics 35, 2 (Summer 2004): 245-59.
Handle: RePEc:nbr:nberwo:9763
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  • D2 - Microeconomics - - Production and Organizations
  • G3 - Financial Economics - - Corporate Finance and Governance

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