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Managerial Accountability Under Yardstick Competition

Michele Giuranno (), Marcella Scrimitore () and Giorgos Stamatopoulos ()

The B.E. Journal of Theoretical Economics, 2020, vol. 20, issue 2, 4

Abstract: Two well-known mechanisms for enhancing managers’ accountability are yardstick competition and internal monitoring. Yardstick competition puts managers in direct competition when firms make decisions for re-appointment. Monitoring is used by firms to detect managers’ rent-seeking activities. While common wisdom suggests that the joint use of the two means would reinforce each other in promoting managers good practices, we find that their interplay distorts managers’ behavior who may end up acting in a less accountable way. Furthermore, differences in monitoring across firms bias that distortion, yielding even more counterintuitive results.

Keywords: Tullock context success function; rent seeking; managerial discretion (search for similar items in EconPapers)
JEL-codes: D D2 D7 M2 (search for similar items in EconPapers)
Date: 2020
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