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Managerial accountability under yardstick competition

Author

Listed:
  • Giuranno, Michele G.
  • Scrimitore, Marcella
  • Stamatopoulos, Giorgos

Abstract

Two well-known mechanisms for enhancing managers' accountability are yardstick competition and internal monitoring. Yardstick competition puts managers in direct competition when firms make decisions for re-appointment (Tirole, 2006). Monitoring is used by firms to detect managers' rent-seeking activities. While common wisdom suggests that the joint use of the two means would reinforce each other in promoting managers’ good practices, we find that their interplay distorts managers' behavior who may end up acting in a less accountable way. Furthermore, differences in monitoring across firms bias that distortion, yielding even more counterintuitive results.

Suggested Citation

  • Giuranno, Michele G. & Scrimitore, Marcella & Stamatopoulos, Giorgos, 2019. "Managerial accountability under yardstick competition," MPRA Paper 92867, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:92867
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    References listed on IDEAS

    as
    1. Roger D. Congleton & Arye L. Hillman (ed.), 2015. "Companion to the Political Economy of Rent Seeking," Books, Edward Elgar Publishing, number 15325.
    2. Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
    3. Di Liddo, Giuseppe & Giuranno, Michele G., 2016. "Asymmetric yardstick competition and municipal cooperation," Economics Letters, Elsevier, vol. 141(C), pages 64-66.
    4. Allers, Maarten A., 2012. "Yardstick competition, fiscal disparities, and equalization," Economics Letters, Elsevier, vol. 117(1), pages 4-6.
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    More about this item

    Keywords

    Tullock context success function; rent seeking; managerial discretion;
    All these keywords.

    JEL classification:

    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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