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Contracting with a quiet life manager

Author

Listed:
  • Eduard Alonso-Paulí

    (Department of Economics, Universidad Pablo de Olavide)

Abstract

The aim of this paper is to analyze how employees may affect firm's corporate governance. In particular, we analyze a shareholder-manager relationship through a principal-agent framework. The manager is the agent in charge of taking decisions for firm's success. Yet, when deciding, the manager takes into account employees' preferences, i.e. the manager wants to enjoy a "quiet life". Our result highlight that having a quiet-life manager is not necessarily linked to destroy value, as suggested in recent research. It might even recover part of the efficient decisions (at a cost borne by the shareholder).

Suggested Citation

  • Eduard Alonso-Paulí, 2007. "Contracting with a quiet life manager," Working Papers 07.19, Universidad Pablo de Olavide, Department of Economics.
    • Handle: RePEc:pab:wpaper:07.19
    as

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    File URL: http://www.upo.es/serv/bib/wps/econ0719.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Quiet-life bias; Corporate Governance; Moral Hazard;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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