NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Understanding Corporate Governance Through Learning Models of Managerial Competence

Benjamin E. Hermalin, Michael S. Weisbach

NBER Working Paper No. 20028
Issued in April 2014
NBER Program(s):   CF   LE   LS

A manager's shareholders, board of directors, and potential future employers are continually assessing his ability. A rich literature has documented that this insight has profound implications for corporate governance because assessment generates incentives (good and bad), introduces assorted risks, and affects the various battles that rage among the relevant actors for corporate control. Consequently, assessment (or learning) is a key perspective from which to study, evaluate, and possibly even regulate corporate governance. Moreover, because learning is a behavior notoriously subject to systematic biases, this perspective is a natural avenue through which to introduce behavioral and psychological insights into the study of corporate governance.

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Document Object Identifier (DOI): 10.3386/w20028

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