NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Limited Managerial Attention and Corporate Aging

Claudio Loderer, René Stulz, Urs Waelchli

NBER Working Paper No. 19428
Issued in September 2013
NBER Program(s):   CF

As firms have more assets in place, more of management's limited attention is focused on managing assets in place rather than developing new growth options. Consequently, as firms grow older, they have fewer growth options and a lower ability to generate new growth options. This simple theory predicts that Tobin's q falls with age. Further, competition in the product market is expected to slow down the decrease in Tobin's q because it forces firms to look for alternative sources of rents. Similarly, greater competition in the labor market reduces the decrease in Tobin's q with age because old firms are in a better position to hire employees that can help with innovation. In contrast, competition in the market for corporate control should accelerate the decline because it forces management to focus more on managing assets in place whose performance is more directly observable than on developing growth options where results may not be observable for some time. We find strong support for these predictions in tests using exogenous variation in competition.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19428

Users who downloaded this paper also downloaded these:
Edmans, Heinle, and Huang w19420 The Real Costs of Disclosure
Cohen, Lou, and Malloy w19429 Playing Favorites: How Firms Prevent the Revelation of Bad News
Asquith, Covert, and Pathak w19417 The Effects of Mandatory Transparency in Financial Market Design: Evidence from the Corporate Bond Market
Pan, Wang, and Weisbach w19330 CEO Investment Cycles
Cheng, Hong, and Shue w19432 Do Managers Do Good with Other People's Money?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us