Discouraging Rivals: Managerial Rent-Seeking and Economic Inefficiencies
We argue here for a broader view of the biases in managers' decisions: In general, managerial rent-seeking affects not only the level of investment, but also the form. Our basic hypothesis is simple: given the now well-established scope for managerial discretion, managers have an incentive to exercise that discretion to enhance their income. Any managerial contract is subject to renegotiation, and a manager's pay is the outcome of an often bewildering bargaining process between management, the board of directors, and rival management teams or takeover artists.
American Economic Review, vol. 85, no.5, pp. 1301-1312, December 1995. citation courtesy of