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Contracting with a quiet life manager

Eduard Alonso-Pauli ()

No 07.19, Working Papers from Universidad Pablo de Olavide, Department of Economics

Abstract: The aim of this paper is to analyze how employees may affect firm's corporate governance. In particular, we analyze a shareholder-manager relationship through a principal-agent framework. The manager is the agent in charge of taking decisions for firm's success. Yet, when deciding, the manager takes into account employees' preferences, i.e. the manager wants to enjoy a "quiet life". Our result highlight that having a quiet-life manager is not necessarily linked to destroy value, as suggested in recent research. It might even recover part of the efficient decisions (at a cost borne by the shareholder).

Keywords: Quiet-life bias; Corporate Governance; Moral Hazard (search for similar items in EconPapers)
JEL-codes: D86 L26 M14 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-12
New Economics Papers: this item is included in nep-bec and nep-ppm
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Downloads: (external link) First version, 2007 (application/pdf)

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