NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Claudio Loderer

Universität Bern
Engehaldenstrasse 4
CH-3012 Bern, Switzerland

E-Mail: claudio.loderer@ifm.unibe.ch

NBER Working Papers and Publications

September 2013Limited Managerial Attention and Corporate Aging
with René Stulz, Urs Waelchli: w19428
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 ...
 
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