NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Enjoying the Quiet Life: Corporate Decision-Making by Entrenched Managers

Naoshi Ikeda, Kotaro Inoue, Sho Watanabe

NBER Working Paper No. 23804
Issued in September 2017
NBER Program(s):Corporate Finance Program

In this study, we empirically test “quiet life hypothesis,” which predicts that managers who are subject to weak monitoring from the shareholders avoid making difficult decisions such as risky investment and business restructuring with Japanese firm data. We employ cross-shareholder and stable shareholder ownership as the proxy variables of the strength of a manager’s defense against market disciplinary power. We examine the effect of the proxy variables on manager-enacted corporate behaviors and the results indicate that entrenched managers who are insulated from disciplinary power of stock market avoid making difficult decisions such as large investments and business restructures. However, when managers are closely monitored by institutional investors and independent directors, they tend to be active in making difficult decisions. Taken together, our results are consistent with managerial quiet life hypothesis.

download in pdf format
   (339 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w23804

Published:

Users who downloaded this paper also downloaded* these:
Mocan and Yu w23709 Can Superstition Create a Self-Fulfilling Prophecy? School Outcomes of Dragon Children of China
Kaplan and Sorensen w23832 Are CEOs Different? Characteristics of Top Managers
Gibbons w6695 Incentives in Organizations
Phillips and Zhdanov w24082 Venture Capital Investments and Merger and Acquisition Activity Around the World
Graham and Leary w23767 The Evolution of Corporate Cash
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us