Managerial Career Concerns and Investments in Information

Milbourn, Todd T.; Shockley, Richard L.; Thakor, Anjan V.

doi:10.2307/2696413

Cited by 86 publications

(43 citation statements)

References 24 publications

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“…The effects of career concerns have been analyzed in many settings, including corporate investment decisions (Avery and Chevalier 1999;Milbourn, Shockley, and Thakor 2001;Prendergast and Stole 1996;Scharfstein and Stein 1990), trading patterns of mutual fund managers (Chevalier and Ellison 1999), analysts' forecasting behavior (Chen and Jiang 2004;Ehrbeck and Waldmann 1996;Trueman 1994), and incentives in government agencies (Dewatripont, Jewitt, and Tirole 1999). In general, the effects of career concerns on individual behavior depend on the performance measures being used to evaluate individuals and on how these measures affect future compensation.…”

Section: Theorymentioning

confidence: 99%

Security Analyst Independence

FrancisJennifer¹,

ChenQi²,

PhilbrickDonna³

et al. 2004

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Section: Theorymentioning

confidence: 99%

Security Analyst Independence

FrancisJennifer¹,

ChenQi²,

PhilbrickDonna³

et al. 2004

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“…This assumption is made merely to illustrate the increased surplus that is likely to arise from improving monitoring. 14 See Milbourn, Shockley, and Thakor, 2001, for other work on how limited observability of outcomes affects career concerns problems.…”

Section: Outcomes Where Consumers Induce Effort Exertionmentioning

confidence: 99%

Consumers and Agency Problems

Prendergast

2001

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Consumers play a central role in solving agency problems. For example, someone who receives poor service in a restaurant or store can ask to "see the manager". Similarly, a person incorrectly denied unemployment benefit or unlawfully arrested has opportunities to appeal the decision to a higher authority. Consumers feedback to firms comes in a variety of forms, such as customer satisfaction surveys, appeals, suits, complaints machanisms, "focus groups", market research surveys etc., and is used for a host of reasons. 1 One reason to solicit (or perhaps a byproduct of soliciting) consumer feedback is to effectively monitor the actions of employees. The purpose of this paper is to understand how well they do so.Consumers are a relatively cheap way of getting information on the performance of employees.Yet agency theory has largely ignored their role: instead, monitoring precision typically appears as an exogenous parameter of the agency problem. (See Prendergast, 1999, for a review.) I argue here that a careful focus on consumers can help understand the ability of firms to resolve agency problems, where their role depends on the congruence in preferences between consumers and principals. 2The idea can be easily explained by a pair of examples. First, consider a restaurant customer who receives poor service. Both the customer and the owner of the restaurant likely wish that the customer has good service, as the restaurant's success depends on it. I show below that in this situation, the agent can be effectively monitored by the consumer, as the consumer has the "right" objectives. In effect, the incentives of the customer are aligned with those of the principal, which both improves incentives and oversight to correct mistakes. By contrast, now consider an applicant for unemployment benefits. Here, there is considerable divergence in the preferences of the Department of Labor and an applicant for unemployment benefit: the applicant always wants to be approved for benefits, while the Department wishes to deny unqualified candidates. I show below that in this latter case not only are customers less useful, but more surprisingly, using consumer feedback can be harmful to efficiency.The model below has the following features. First, a good has to be allocated to a consumer, where the optimal allocation depends on some information available to the agent. Second, she can exert effort to improve the quality of her information. Third, monitoring by the principal is costly, so he would like some information that an error has occurred before intervening. This is where 1 Such feedback is useful to identifying consumer preferences, pointing out defects in product design, correcting inadvertant mistakes, and so on.2 See Aghion and Tirole, 1997, for other work stressing the importance of congruence in preferences, though in their case they emphasize correlation in preferences between agents and principals.

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“…Banisar (2004) reports that in 2004 over …fty countries, including the US and most EU members, had adopted Freedom of Information (FOI) laws and over thirty more had pending e¤orts. However, this move toward greater transparency 2 Less directly related is the work of Biglaiser andMezzetti (1997), Milbourn, Shockley andThakor (2001) and Suurmond, Swank and Visser (2004). These authors study how reputational concerns a¤ect the incentives to implement projects and invest in information.…”

Section: Examplesmentioning

confidence: 99%

On the (Mis-) Use of Information for Public Debate

Vikander

Patacconi

2009

SSRN Journal

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Policymakers often motivate their decisions by disclosing information. While this can help hold the government to account, it may also give incumbents an incentive to "…x the evidence" around their preferred policy. This paper studies how di¤erent disclosure rules and the degree of independence of government agencies a¤ect citizen welfare when manipulation incentives are present. When both instruments can be chosen to maximize citizen welfare, secrecy is never socially optimal because its chief advantage-unbiased information-can more e¢ ciently be achieved by insulating the agency from political pressure. And yet granting independence to the agency is not necessarily in the citizens'interest. For given evidence, in fact, biased information makes the government more reluctant to implement its ex ante preferred policy, thus mitigating the agency con ‡ict between the government and the public. The model therefore provides a novel rationale for the optimality of nonindependent agencies.

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Managerial Career Concerns and Investments in Information

Cited by 86 publications

References 24 publications

Security Analyst Independence

Security Analyst Independence

Consumers and Agency Problems

On the (Mis-) Use of Information for Public Debate

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