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Management cycles

Shingo Ishiguro ()
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Shingo Ishiguro: Osaka University

Economic Theory, 2022, vol. 73, issue 1, No 9, 257-300

Abstract: Abstract In this study, we present a dynamic theory of management cycles under which firms endogenously switch between management regimes with different levels of profitability over time. Firms accumulate managerial capital as intangible assets such as managerial knowledge, know-how, and skills over time subject to limited contract enforcement. We show that the current managers of a firm are disciplined by not only the managerial capital accumulated through past business operations but also the market valuation of the future profitability of the firm. Through such dynamic interactions, we show that management cycles endogenously emerge and persist over time.

Keywords: Dynamic enforcement; Managerial capital; Moral hazard (search for similar items in EconPapers)
JEL-codes: D21 D86 M21 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00199-020-01337-2

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