Assessing Managerial Ability: Implications for Corporate Governance

Benjamin Hermalin and Michael Weisbach

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: A manager's current and potential future employers are continually assessing her or his ability. Such assessment is a crucial component of corporate governance and this chapter provides an overview of the research on that aspect of governance. In particular, we review how assessment generates incentives (both good and bad), generates risks that must be faced by both managers and firms, and affects the contractual relationships between those parties in important ways. Assessment (or learning) proves a key perspective from which to study, evaluate, and possibly even regulate corporate governance. Moreover, because learning is a behavior notoriously subject to systematic biases, this perspective is a natural avenue through which to introduce behavioral and psychological insights into the study of corporate governance.

JEL-codes: D81 D83 G34 M12 (search for similar items in EconPapers)
Date: 2017-01
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2017-01

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