Managerial Effort Incentives and Market Collusion管理努力的激励与市场合谋

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阅读笔记：《Managerial incentives and risk-taking》

阅读笔记：《Managerial incentives and risk-taking》2009级金工一班刘蓓蓓一.研究问题及意义作者提供了经验数据以证明企业经营报酬与投资政策、负债政策、公司风险之间存在强烈的因果关系。

并具体说明了公司的政策选择和经营报酬方案是如何相互决定的。

二.相关文献过去的文献所研究的报酬政策大多与“报酬结构如何影响可观察的经营决策”非直接相关。

一部分研究检验了公司多样的特征如何和多样的报酬方案联系起来，另一部分研究则把报酬方案的产生与公司绩效联系起来。

这两类研究通常是相互独立的，这也暴露了经验设计在内生性和因果性方面存在的问题。

也有部分文献尝试着研究与本文相关的问题，即经营者的激励是否对政策决定有所影响。

还有部分学者探索了经营者股票或期权的持有权和融资策略之间的关系，并得出了不同的结论。

三.研究地位及贡献过去的研究所提供的大量证据表明公司的风险政策与报酬结构存在着关联，但几乎没有经验设计能够对这基本的因果关系进行估计。

本文的基本贡献是应用了恰当的模型和统计的模型去从数据中获取结论。

另外还从以下方面对之前的研究进行了改进：（1）通过将VEGA和DELTA值同时引入回归，作者得以分别将它们对风险承担的激励作用隔离开来。

如，在研究公司风险和VEGA的关系时，作者对DELTA 进行了控制变量的处理。

而之前的文献只是集中讨论报酬结构的一个因素，VEGA 或DELTA，并没有对另一个变量进行控制。

（2）几乎所有之前的实证研究都采用了与报酬结构相关的却不完善的代表因素来作为解释变量的基础。

而那些因素与报酬特征（尤其是VEGA和DELTA 值）并不直接关联。

通过对经营者股票、期权的整体投资组合的VEGA和DELTA 值进行估计，我们获得了对公司激励的更精确的测量方法。

（3）许多研究采用的样本规模很小，而且常常只是对一些特殊的重大事件进行研究，如公司并购等。

本文作者则收集了规模很大的样本，包含来自不同行业，时期跨度由1992到2002年（这个时期以股权为基础的报酬激励得到了长足的发展）的超过1500家公司。

A Theory Of Participative Budgeting

THE ACCOUNTING REVIEW American Accounting Association Vol.89,No.3DOI:10.2308/accr-50686 2014pp.1025–1050A Theory of Participative BudgetingMirko S.HeinleUniversity of PennsylvaniaNicholas RossTinyCoRichard E.SaoumaMicrosoftABSTRACT:This paper complements the ongoing empirical discussion surroundingparticipative budgeting by comparing its economic merits relative to a top-downbudgeting alternative.In both budgeting regimes,private information is communicatedvertically between a principal and a manager.We show that top-down budgeting incursfewer agency costs than bottom-up budgeting whenever the level of informationasymmetry is relatively low.Although the choice between top-down and bottom-upbudgeting ultimately determines who receives private information within the firm,we findthat both the principal and manager’s preferences over the allocation of privateinformation remain qualitatively similar across the two budgeting paradigms.Specifically,while the principal always prefers either minimal or maximal private information,themanager prefers an interim or maximal level of private information regardless of who isprivately st,we use our model to address empirical inconsistencies relatingthe firm’s choice of budgeting process,the resulting budgetary slack,and performance.Keywords:participative budgeting;top-down budgeting;bottom-up budgeting;decen-tralization;budgetary slack;rents.I.INTRODUCTIONA key element of anyﬁrm’s organizational design is the structure of informationﬂowsbetween different levels of hierarchy.By governing‘‘coordination and communication among subunits within the company,’’budgeting processes formalize how information is used and shared withinﬁrms(Horngren,Datar,and Rajan2012,185).Consistent with recent trends toward organizational decentralization(Rajan and Wulf2006;Roberts2004),surveys report that ﬁrms are increasingly turning to participative,or so-called‘‘bottom-up,’’budgeting processes(StoutFirst and foremost we thank John Harry Evans III for his support in improving the paper.We further thank two anonymous referees as well as workshop participants at the2012AAA Annual Meeting and at the Workshop on Accounting and Economics and seminar participants at Columbia University;Tuck School of Business,Dartmouth College;and Foster School of Business,University of Washington.Editor’s note:Accepted by John Harry Evans III.Submitted:July2011Accepted:December2013Published Online:December20131025and Shastri 2008).In contrast to top-down approaches,participative budgeting processes rely on managerial reporting,thereby empowering managers to inﬂuence their day-to-day activities and performance targets.One of the main criticisms of participative budgeting processes is that managers may beneﬁt from strategically misreporting private information.To prevent managers from ‘‘padding their budgets,’’Baiman and Evans (1983)establish that effective participative budgeting contracts must provide managers with informational rents,i.e.,with additional compensation to incentivize truthful reporting.In contrast,top-down or authoritative budgeting processes eliminate a manager’s option to game his compensation by transferring all decision rights to the ﬁrm’s central ofﬁce or mon wisdom and accounting textbooks suggest that authoritative budgeting is largely inefﬁcient because the manager’s information goes unused.However,we ﬁnd that even holding the level of private information constant between top-down and bottom-up budgeting,the latter may nonetheless prove optimal.In our model,the principal receives all interim private information under top-down budgeting,whereas the manager receives the identical information under bottom-up budgeting.Top-down budgeting eliminates the manager’s incentive to game his compensation by endowing the principal with all private information.However,the manager may still collect rents so as to incentivize the principal to report truthfully.In this paper we show how the level of private information available in the ﬁrm—which we term the ﬁrm’s information environment —affects the relative merits of top-down versus bottom-up budgeting.Empirical work connecting the use of participative budgeting processes to ﬁrm performance,slack,and asymmetric information has largely provided mixed evidence.1For example,J.Shields and M.Shields (1998,50)state that ‘‘studies have reported [...]that participative budgeting has linear positive,linear negative,ordinal and disordinal interaction (with other independent or moderating variables),and no effect on motivation and performance.’’Similarly,while Merchant (1985)and Young (1985)conclude that participatory budgeting increases the amount of slack in ﬁnancial budgets,Dunk (1993)suggests that participation can reduce slack.In their review of the literature,Shields and Young (1993)suggest that the mixed evidence could be the result of ignoring path dependencies among information asymmetry,the use of participatory budgeting,and budget-based incentives or budgetary emphasis.Similarly,Shields and Shields (1998)propose that the conﬂicting empirical results may be due to ‘‘a lack of general or integrative models.’’We provide such an integrative model that explicitly examines the effects of the ﬁrm’s information environment on its choice of budgeting process and subsequent incentives.Speciﬁcally,in Stage 1of our two-stage model,the principal chooses between a participative and a top-down budgeting process.In Stage 2,private information is shared between the principal and manager via the chosen budgeting process,production targets are established,the manager provides productive effort,and payoffs are realized.Textbooks argue that the advantages of bottom-up budgeting include the ability for managers to impound their localized information in setting goals and that managers’involvement in the budgeting process increases their motivation to reach the speciﬁed goals (Braun,Tietz,and Harrison 2009,477).Top-down budgeting,on the other hand,enables ﬁrms to use the information gleaned from one department in negotiating with other departments and to choose targets that are consistent with the ﬁrm’s long-term strategy.We show that either budgeting process can be the ﬁrm’s preferred choice,even holding constant the amount of available information between the two budgeting regimes,the manager’s motivation,and the ﬁrm’s coordination initiatives.Instead,we identify the costs that arise from the budgeting process purely as a result of information asymmetries,namely,the informational 1Surveys of the literature can be found in Shields and Young (1993),Shields and Shields (1998)and Brown,Evans,and Moser (2009).1026Heinle,Ross,andSaouma The Accounting ReviewMay 2014rents(budgetary slack)necessary to induce honest reporting.To capture the value of communication in organizations,we assume that theﬁrm’s productivity is unknown in Stage1,but that at the beginning of Stage2,either the principal or manager receives relevant,interim private information about the manager’s productivity.2Inherent with her choice of budgeting process,the principal chooses who receives information and how the information is used in setting goals.We assume that under bottom-up budgeting,the manager receives and communicates private information,whereas under top-down budgeting,the principal receives and communicates private information.For example,a manager’s information may pertain to segment demand or lower-level employee quality, whereas a principal’s information may pertain to industry orﬁrm-level demand shocks.To compare between the two budgeting processes,we hold the quality of information received constant across both systems.Once the budgeting report is made,the manager decides how much effort to exert based on his updated productivity beliefs.When the principal holds an informational advantage,she beneﬁts from misreporting excessively optimistic information,since this leads the manager to exert high effort in expectation of earning high compensation.A similar intuition explains the manager’s interest in misreporting excessively pessimistic information when he himself is privately informed,as he can reduce his effort and still expect high compensation.3As noted above,Baiman and Evans(1983)point out that to prevent misreporting in a bottom-up system,the principal must provide the manager with information rents when he reports favorable information.However,the literature has largely ignored the fact that to prevent misreporting in a top-down system,the principal must forgo proﬁts when she reports favorable information.In both budgeting processes,the principal has two budgetary levers to induce truthful reporting:ﬁxed payments from the manager’s division and variable payments contingent on divisional cashﬂows.Whileﬁxed payments directly alter the incentives for honest reporting, variable payments have an additional indirect effect by distorting the manager’s effort choice.To ensure honest reporting,the optimal budget in a bottom-up regime distorts the manager’s effort incentives when he reports unfavorable information,whereas the optimal top-down budget distorts the manager’s effort incentives when the principal reports favorable information.In other words, when the informed party communicates information that coincides with their preferred(strategic) report,the manager’s effort incentives are optimally reduced belowﬁrst-best.Weﬁnd that the total surplus shared between the manager and the principal is maximized under bottom-up budgeting.However,the principal’s surplus is maximized under top-down budgeting when the amount of private information is relatively low.4Because the principal ultimately chooses which budgetary system to put in place,we predict a switch from top-down to bottom-up budgeting as the amount of private information increases.Because the different regimes provide very different incentives,our model predicts a non-monotonic relation between budget-based incentives and information asymmetry,consistent with Shields and Young(1993).That the principal’s preferences(and therefore theﬁrm’s performance)vary with the level of asymmetric information is a result of two fundamental effects.First,effort distortions are more costly under top-down budgeting than under bottom-up budgeting,because the former occurs when productivity is greatest.Second,under bottom-up budgeting,the principal suffers from a control 2While we assume that the principal and manager cannot both receive private information,we discuss settings with bilateral private information in Section V.3We refer to the manager as‘‘misreporting excessively pessimistic information’’and the principal as ‘‘misreporting excessively optimistic information’’to indicate when,independent of the actual information content,the manager reports his information as unfavorable whereas the principal reports her information as favorable,respectively.4The‘‘amount of private information’’and the‘‘level of information asymmetry’’both refer to the informativeness of the private information.In our model,multiple less precise signals are equivalent to one more precise signal when both sets induce the same posterior beliefs.A Theory of Participative Budgeting1027The Accounting Review May2014loss because the manager controls both the reporting and productive effort decisions.5Top-down budgeting avoids this control loss and the associated agency costs by separating the production and reporting roles,with the principal issuing the report and the agent choosing the productive effort.When choosing the budgeting process,the principal trades-off the costs of the necessary effort distortions with the control loss.The cost of the effort distortion increases relative to the control loss as the amount of private information increases,such that the principal prefers top-down budgeting for lower levels of private information,but shifts to bottom-up budgeting as the private information becomes more informative.Our modeling of both budgeting processes is rooted in the associated economics literature on screening.Bottom-up budgeting shares many common features with the adverse-selection model ﬁrst introduced by Baron and Myerson (1982)in which a regulator contractually screens the ﬁrm’s private information.Top-down budgeting is similar to the informed principal problem found in Maskin and Tirole (1990).6However,the economics literature typically assumes that the allocation of information,for example through the budgeting process,is entirely exogenous.One notable exception is Eso and Szentes (2003)where the principal cannot decipher the favorableness of information,but must nonetheless decide how much information to share with the manager at the outset,and how much to reveal after the manager’s interim report.Our work differs because our principal and manager are equally adept at interpreting information;therefore,the principal can control the allocation of information ex ante and,in the top-down regime,she can strategically misreport information ex post .A second stream of related literature investigates the design of information systems.This literature examines preferences over the level of information available but holds constant the allocation of information (Antle and Fellingham 1995;Christensen 1982).We extend this literature in the following two ways.First,we characterize the principal’s choice of the information allocation or budgeting process for any level of available information.Second,based on the chosen budgeting process,we analyze the principal’s and manager’s preferences over the level of information available.Surprisingly,we ﬁnd that both parties’preferences are qualitatively similar regardless of who receives private information.We show that in both budgeting frameworks,the principal’s (manager’s)utility is U-shaped (single peaked)over the total level of private information.When the principal receives the private signal,both she and the manager are subject to agency problems,akin to the dual moral-hazard problem with asymmetrically informed players.Arya,Glover,and Sivaramakrishnan (1997)consider such a setting and allow the principal to condition her efforts on her privately observed interim signal.The authors identify conditions under which additional information aggravates the principal’s commitment problem,indicative of a non--monotonic preference for private information.In our setting,we ﬁnd that even in the absence of a second moral-hazard problem,the principal will exhibit a similar,non-monotonic preference for additional private information.Importantly,our model addresses the extant empirical and experimental literature on budgeting.Much of the prior research on participative budgeting has analyzed the consequences of participative budgeting in terms of performance (Brownell 1982;Frucot and Shearon 1991),budgetary slack (Dunk 1993;Fisher,Maines,Peffer,and Sprinkle 2002),and budget emphasis (Young 1985).As described earlier,the different empirical studies have identiﬁed positive,negative,or non-existent effects of participative budgeting on performance,motivation,and budgetary slack.We offer a possible explanation for the mixed empirical results by isolating the 5Similar to Melumad,Mookherjee,and Reichelstein (1997),we use the term ‘‘control loss ’’in reference to the manager’s ability to exploit his private information in choosing effort in conjunction with his report in the bottom-up framework.6An excellent survey of the screening literature can be found in Riley (2001).1028Heinle,Ross,andSaouma The Accounting ReviewMay 2014roles of a ﬁrm’s information environment and the ﬁrm’s choice of budgeting process on the outcomes of the ﬁrm’s budgeting choice.Speciﬁcally,we ﬁnd that the ﬁrm’s information environment is a monotonic driver of the choice of budgeting process,but a non-monotonic driver of the ﬁrm’s performance,motivation,and budgetary slack.Therefore,the relation between a ﬁrm’s choice of budgeting process and the outcomes is also non-monotonic.We present the model below in Section II.Section III ﬁrst characterizes the optimal contracts under top-down and bottom-up budgeting,and Section IV then analyzes the relative attributes of each regime.Section V introduces a numerical example and Section VI concludes following a discussion of the results.II.MODELWe model a principal (she),who employs a manager (he)at time t ¼1to manage a division of the principal’s ﬁrm until time t ¼5.We assume that both players are risk-neutral and that the manager retains—and therefore maximizes—his division’s proﬁts.At time t ¼4the manager exerts unobservable effort,e ,at a personal cost of ½Te 2:The manager’s efforts contribute to the probability that his division generates high cash ﬂows,¯p ;rather than low cash ﬂows, p ;at t ¼5.Cash ﬂows are contractible and received directly by the manager’s division.Out of the realized cash ﬂows the manager makes payments to the principal at t ¼5such that his compensation is given by divisional proﬁts that equal the realized cash ﬂows minus any payments to the principal.Cashﬂows,˜p ;are random with an expected value of p ¼e h ¯p þð1Àe h Þ p ;where e h 2[0,1]is the probability of attaining high cash ﬂows and h is a measure of the manager’s productivity.7At the time of contracting,t ¼1,the manager’s productivity is known to be either high,h H ,with probability p ,where 0,p ,1,or low,h L ,with probability 1Àp .We denote the expected productivity as ¯h:At time t ¼1the principal proposes a set of two budgets to the manager.After the manager is hired,at time t ¼2,interim information concerning the manager’s true productivity becomes available in the form of a signal,ˆh2f ˆh L ;ˆh H g that is ‘‘soft ’’in the sense that it cannot be veriﬁed by anyone other than the recipient.Budgets are ﬁnalized at time t ¼3,when either the manager (bottom-up budgeting)or principal (top-down budgeting)reports his/her private information,which is ˆhL or ˆh H :The budget report is then mapped to one of the budgets from the set proposed at time t ¼1.By ﬁling a report,the informed party communicates his/her information to the uninformed party.8The ﬁrm’s budgeting process therefore deﬁnes both the underlying information system and the responsibilities of the principal and the manager.We assume that the principal publicly chooses the ﬁrm’s organizational structure at time t ¼0.This choice if reﬂected in the set of budgets proposed at t ¼1.Figure 1depicts the timing of events in our model.Note that in this context budgets would convey no information were the speciﬁc budget chosen prior to the arrival of information.This is particularly relevant in models with risk-neutral managers because,depending on wealth constraints,the ﬁrst-best solution could often be obtained by the principal ‘‘selling the ﬁrm ’’to the manager.For budgeting to convey relevant information,the budget must therefore be chosen at t ¼3,i.e.,after private information is received,but before the manager selects his effort.97Rather than imposing an upper limit on the probability of attaining high cash ﬂows,we instead assume that the manager’s cost of effort parameter,T ,is sufﬁciently large to prevent e !1=h from ever being optimal.8We refer to the privately observed information as a ‘‘signal ’’and to the communication of that signal as a ‘‘report ’’or the ‘‘choice of a budget.’’9We later discuss our rationale for excluding ex ante contracting and the limitations of this approach.A Theory of Participative Budgeting 1029The Accounting ReviewMay2014The signal received at t ¼2provides incremental information regarding whether the manager’s true productivity is ˆhL or ˆh H :Following Rajan and Saouma (2006),we parameterize private information such that:Pr ½h i j ˆh j ¼a þð1Àa ÞPr ½h i i ¼j ð1Àa ÞPr ½h i i ¼j8a 2ð0;1Þand i ;j 2H ;L f g :ð1Þ From (1),the signal realization is itself the ex post expected productivity,as E ½h j ˆh i ¼a h i þð1Àa Þ¯h ¼ˆh i :10Since high productivity is preferred,we refer to ˆh H as favorable information and ˆh L as unfavorable information.The exogenous parameter a measures the correlation between the true productivity,h ,and the signal,ˆh:One may interpret a as the quality or quantity of information conveyed by the signal,or more generally,a can be thought of as the ‘‘informativeness ’’of the signal.Since the signal is only observed by the informed party,a also captures the degree of information asymmetry.As a !1,our setting approaches the perfectly informed paradigm found in the adverse-selection and informed principal literatures,while as a !0,all members of the ﬁrm become symmetrically uninformed,regardless of any privately observed information.For our parameterization to be properly speciﬁed,the ex ante expected productivity at t ,2must be independent of future information for all values of a ,E ½E ½h j ˆhj ¼E ½h :Therefore,we must assume that the signal and the true productivity share the same underlying distribution,such that Pr ½h H ¼Pr ½ˆh H ¼p and Pr ½h L ¼Pr ½ˆh L ¼1Àp :Consequently,the informativeness parameter a ,measures the correlation between the privately observed signal ˆhand the manager’s realized productivity h .The manager’s cost of effort T ,the probabilities of both high effort productivity and a favorable signal Pr ½ˆhH ¼Pr ½h H ¼p ,and a ,the level of information conveyed by ˆh ,are all determined exogenously,and commonly known at time t ¼0.The bargaining power is distributed between the principal and manager such that at t ¼1,the principal makes a take-it-or-leave-it offer to the manager that speciﬁes the ﬁrm’s budgeting process,the manager’s responsibilities,and a set of two budgets,one that corresponds to ˆhL and the other to ˆh H :The budgets are chosen by the informed party during the budgeting process at t ¼3and outline the payments required of the manager’s division.In both the top-down and bottom-up setting,the initial menu serves as a commitment device that disciplines the informed party to reveal their information truthfully by limiting the opportunities to proﬁt from misrepresentation.11Because the manager’s division receives all cash inﬂows at t ¼5,the principal’s payoffs are entirely determined by the payments speciﬁed by the ﬁnal budget.We assume that the budget can FIGURE 1Timeline ofEvents10We thank an anonymous referee for suggesting this notation,which carries no loss of generality.11Under top-down budgeting,the principal could alternatively offer a single contract after becoming informed and all results would remain unchanged.1030Heinle,Ross,andSaoumaThe Accounting ReviewMay 2014include both a ﬁxed payment and a payment that depends on realized divisional cash ﬂows.Speciﬁcally,from the proposed set of two budget pairs at t ¼1,f (a L ,b L ),(a H ,b H )g ,the informed party selects one budget pair (a i ,b i ),such that at t ¼5the manager’s division must provide apayment of a i þb i ˜pto the principal.Because only b i ˜p depends on the divisional cash ﬂows,we label a i the ﬁxed payment and b i ˜pthe variable payment.The speciﬁcation of a i and b i in our model is consistent with multiple interpretations,including overhead cost allocation,burden/tax rates,and linear proﬁt-sharing schemes.First,textbooks on budgeting commonly discuss the allocation of a ﬁrm’s overhead costs to its divisions.12In this context,the direct payments can be interpreted as the allocated overhead costs,where a i is a ﬁxed allocation of overhead costs and b i is the overhead allocation rate applied to the division’s revenues.13Second,in decentralized organizations it is common for headquarters to apply a burden rate or ‘‘tax rate ’’to the divisions’revenues.For example,business schools frequently transfer a percentage of their collected tuition to central campus.Third,one can interpret our direct payment scheme as a linear-sharing rule applied to the divisional cash ﬂows.In this setting,divisional proﬁts are the (1Àb i )share of divisional cash ﬂows that are retained within the division,net of the corporate overhead charge a i .For ease of exposition,we will refer to budget pairs (a i ,b i )as ﬁxed and variable payments.The Revelation Principle allows us to restrict attention to contract menus that specify two contracts per budgeting process such that contract i is selected if and only if ˆhi is reported with i 2f H ,L g .The menu of contracts must satisfy incentive compatibility constraints to prevent misreporting.We assume that the principal must honor the terms she offered at t ¼1throughout the duration of the contract.In contrast,the manager can leave the ﬁrm at any time before receiving divisional cash ﬂows,in which case the game ends.14As a benchmark,we ﬁrst establish the ﬁrst-best solution,where the manager’s effort is contractible and the signal ˆhis privately observed.Lemma 1:When the manager’s effort is contractible,the principal is indifferent between top-down and bottom-up budgeting.Under both regimes,the principal instructs the manager to exert ﬁrst-best effort e FB i ¼ˆh i T ð¯p À p Þand pays him a wage of ˆh 2i 2T ð¯p À p Þ2if he takes the speciﬁed effort following a report ˆh i 2ˆh H ;ˆh L n o :The principal’s expected proﬁts are increasing and convex in signal informativeness,a ,whereas the manager always earns his reservation utility.The optimal ﬁrst-best effort e FB i ¼ˆh i T ð¯p À p Þis derived from the principal’s ﬁrst order condition.Intuitively,higher effort increases the probability of receiving ¯p instead of p at an expected rate of ˆh i and a cost of T .The manager’s ﬁrst-best salary equals the manager’s cost ofeffort such that the manager is indifferent between accepting and not accepting the contract.The benchmark setting of Lemma 1highlights the importance of the underlying moral-hazard problem because without hidden effort,both the principal and manager are indifferent over the choice of budgeting regimes.When effort is contractible,the principal claims all divisional cash ﬂows and the manager will nonetheless accept to work since the principal can pay the manager as a function of 12For example,Horngren et al.(2012,Chap.15)discuss the allocation of support department costs,common costs,and revenues from bundled products.13This corresponds to the notion in accounting textbooks that,for example,common costs may be allocated to the ﬁrm’s divisions based on budgeted numbers (a i )and actual numbers (b i ˜p)14In particular,the principal must be able commit to how the budget report is used before private information is reported.For a discussion on budgeting in the absence of commitment,see Arya et al.(1997).We thank an anonymous referee for pointing out that the tensions we discuss in our model also arise if the signal is privately received at time t ¼0followed by reporting at t ¼1.A Theory of Participative Budgeting 1031The Accounting ReviewMay2014his effort.Because the manager is always reimbursed for his exact cost of effort,regardless of his productivity,he is indifferent between the two signal realizations concerning his productivity,and he therefore has no incentive to misreport under bottom-up budgeting.The same intuition holds for the principal in a top-down budgeting process,which implies that the principal obtains the same optimal payoffs in both settings.Lemma 1shows that the principal’s proﬁts increase in a .In line with the terminology ﬁrst proposed in Demski and Feltham (1976),a controls the level of decision-facilitating information provided in the signal.To simplify the intuition used later,it is important to understand why ﬁrst-best proﬁts are increasing and convex in a .Assuming the manager chooses his ﬁrst-best effort,as a increases,expected productivity in the favorable state increases and that in the unfavorable state decreases.Therefore,even if the manager does not adjust his efforts in the two states,expected proﬁts increase linearly with a ,since higher (lower)effort is matched with even higher (lower)productivity.However,the manager complements the changing productivities by further raising his effort in the favorable state and lessening it in the unfavorable state,thus proﬁts increase convexly with a as in Figure 2.That the manager’s effort increases in the favorable state and decreases in the unfavorable state can be seen from Lemma 1,as e FB H ¼¯p Àp T ¯h þa ð1Àp Þðh H Àh L ÞÞand e FB L ¼¯p Àp ð¯h Àap ðh H Àh L ÞÞ,and both h H Àh L and ¯p Àp are positive.III.HIDDEN EFFORTIn this section,we analyze the choice of the budgeting process when the manager’s efforts are hidden and therefore non-contractible.We deﬁne a budgeting equilibrium with hidden effort as an outcome where:(1)the informed party maximizes its utility by truthfully communicating his/her interim signal;(2)the uninformed party correctly infers the informed party’s information from the latter’scommunication;(3)the manager always selects his expected utility-maximizing effort;(4)the manager’s interim expected utility at t ¼3is non-negative;and(5)the uninformed party is free to choose any contract from the t ¼0menu if the informedparty fails to do so at t ¼2.The Revelation Principle guarantees that the ﬁrst equilibrium requirement is without loss of generality.Conditions (2)–(4)imply that both the principal and manager are rational,whileFIGURE 2First-Best Expected Cash Flows1032Heinle,Ross,and SaoumaThe Accounting ReviewMay 2014。

the managerial discretion theory

the managerial discretion theoryThe Managerial Discretion TheoryIntroduction:The managerial discretion theory is a popular theory in the field of management that explains how managers have the ability to exercise discretion in decision-making and shape the direction of their organization. This theory suggests that managers have a significant impact on organizational outcomes and that their discretion in decision-making plays a crucial role in determining the success or failure of an organization. In this essay, we will explore the various aspects of the managerial discretion theory, including its origins, key concepts, applications, and criticisms. Origins of the Managerial Discretion Theory:The managerial discretion theory emerged during the late 1960s and early 1970s, in response to the dominance of the bureaucratic management approach. This approach emphasized the importance of rules, procedures, and hierarchy in decision-making, leaving little room for managerial discretion. Theorists such as Richard Cyert and James March challenged this approach by arguing that managers should be allowed to exercise discretion and use their judgment in decision-making, as they possess unique knowledge and expertise about the organization and its environment.Key Concepts of the Managerial Discretion Theory:The managerial discretion theory is based on several key concepts that help to explain how managers exercise discretion and shape organizational outcomes. These concepts include bounded rationality, goal ambiguity, resource dependence, and institutionalpressures.Bounded rationality refers to the limitation of human rationality in decision-making. According to Cyert and March, managers are not capable of making fully rational decisions due to cognitive limitations, time constraints, and incomplete information. Instead, managers rely on heuristics and biases to make decisions, which may not always result in the optimal outcome.Goal ambiguity refers to the lack of clarity and consensus among organizational members about organizational goals. This ambiguity provides managers with room for discretion in interpreting and pursuing organizational goals. Managers can prioritize certain goals over others and allocate resources accordingly, based on their own judgment and interpretation of the situation.Resource dependence theory suggests that managers exercise discretion to manage their organization's resource dependencies. Organizations rely on external resources, such as capital, labor, and technology, to function effectively. Managers must negotiate and make decisions to acquire and allocate these resources, which gives them significant discretion in shaping the organization's strategy and direction.Institutional pressures refer to the external social, cultural, and political forces that influence managerial discretion. Managers face pressures from various stakeholders, such as employees, customers, suppliers, government agencies, and the broader society. These pressures shape the decision-making process and can limit orexpand the manager's discretion.Applications of the Managerial Discretion Theory:The managerial discretion theory has been extensively applied in organizational research to understand managerial decision-making and its impact on organizational outcomes. Researchers have examined how managers exercise discretion in various contexts, including strategic decision-making, organizational change, innovation, and corporate governance.Strategic decision-making is a key area where managers exercise discretion. They make choices about the organization's competitive positioning, resource allocation, product development, and diversification. The managerial discretion theory suggests that managers' cognitive biases, heuristics, and interpretation of organizational goals will influence these decisions and their subsequent impact on organizational performance.Organizational change is another area where managerial discretion plays a crucial role. Managers have discretion in initiating and implementing change initiatives, such as restructuring, mergers, acquisitions, and downsizing. The success of these change efforts depends on the manager's ability to exercise discretion effectively, navigate internal and external pressures, and align the organization's goals with the change initiative.Innovation is an important driver of organizational success and competitiveness. Managers play a critical role in fostering innovation within their organizations by creating a supportive culture, allocating resources, and providing necessary autonomyfor employees. The managerial discretion theory suggests that managers with high levels of discretion are more likely to support and promote innovation within their organizations.Corporate governance is the system of rules, practices, and processes by which a company is directed and controlled. The managerial discretion theory has been applied to understand how managers exercise discretion in corporate governance decisions, such as executive compensation, board composition, and shareholder relationships. Managers can shape the governance structure to align their interests with those of shareholders or other stakeholders, depending on their level of discretion.Criticisms of the Managerial Discretion Theory:While the managerial discretion theory has made significant contributions to the field of management, it is not without its criticisms. Some scholars argue that the theory overemphasizes the role of individual managers and neglects the importance of structural and contextual factors. They contend that managers' discretion is constrained by organizational structures, external pressures, and industry dynamics, which limit their ability to shape organizational outcomes.Another criticism of the theory is that it assumes managers always act in the best interest of the organization. However, managers may have their biases, self-interests, and personal agendas that can influence their decision-making and compromise organizational outcomes. This criticism raises questions about the ethical implications of managerial discretion and the need for accountability mechanisms to ensure that managers exercisediscretion responsibly.Conclusion:The managerial discretion theory provides valuable insights into how managers exercise discretion in decision-making and shape organizational outcomes. It emphasizes the importance of managers' knowledge, judgment, and interpretation of organizational goals in driving success. While the theory has been widely applied and has contributed to our understanding of managerial behavior, it is not without its limitations and criticisms. Future research should address these criticisms and further refine the theory to enhance its applicability and validity.。

chapter 11_ManagerialDecisions in Competitive Markets

H U A D = MR = P = $36
Price and Cost(dollars)
ATC
19 16 15
N
B C
AVC
0
400 Quantity FIGURE 11.3 Profit Maximization: P=$36
600 630
Principle
Average profit, (π/Q), is equal to profit margin, which is (P - ATC). The level of output that maximizes total profit occurs at a higher level of output than the output that maximizes profit margin (and average profit). Managers should ignore profit margin (average profit) when making optimal decisions.
Figure 11.2 illustrates the derivation of demand for a price-taking firm. Perfectly elastic demand Horizontal demand facing a single, pricetaking firm in a competitive market (|E|=∞).
11.3 Profit Maximization in The Short Run
In the short run, a manager must make two decisions:
– whether to produce or shut down during the period. – the choice of the optimal level of output.

Classified Boards, Firm Value, and Managerial Entrenchment

Classified Boards, Firm Value, and Managerial Entrenchment*Olubunmi Faleye*College of Business Administration, Northeastern University, Boston, MA 02115, USAJanuary 2006AbstractThis paper shows that classified boards destroy value by entrenching management and reducing director effectiveness. First, I show that classified boards are associated with a significant reduction in firm value and that this holds even among complex firms, although such firms are often regarded as most likely to benefit from staggered board elections. I then examine how classified boards entrench management by focusing on CEO turnover, compensation incentives, proxy contests, and shareholder proposals. My results indicate that classified boards significantly insulate management from market discipline, thus suggesting that the observed reduction in value is due to managerial entrenchment and diminished board accountability.JEL classification: G34Keywords: Classified boards; Managerial entrenchment; Executive compensation.* I am indebted to Tina Yang, Anand Venkateswaran, Kenneth Kim, Ashok Robin, Randall Morck, and an anonymous referee for their comments and suggestions, which have helped to improve the paper. I am also indebted to Dmitriy Strunkin for his assistance with the director turnover and board stability data. Research support from the Joseph G. Riesman Research Professorship and the David R. Klock Fund is gratefully acknowledged. An earlier version of the paper was titled “Classified boards and long-term value creation.” * Tel.: +1 617 373 3712E-mail address: o.faleye@.1. IntroductionOn April 23, 2003, 85% of the shares represented at Baker Hughes’ annual meeting were voted in favor of a shareholder proposal asking the company to declassify its board and elect all directors annually. According to the Investor Responsibility Research Center (IRRC), Baker Hughes was only one of several companies facing shareholder agitation on classified boards during the 2003 proxy season. On its web site, IRRC identified 56 shareholder proposals dealing with classified boards and counted the issue as one of the two key governance-related proposals for the year.The election of directors is the primary avenue for shareholders to participate in corporate affairs. In general, directors are elected for one-year terms at the firm’s annual meeting. Activist shareholders and institutional investors argue that this encourages effective monitoring by giving shareholders the opportunity to retain or replace directors each year. In addition, annual elections ensure that the entire board can be replaced at once in the event of a hostile acquirer making a successful bid for the company. Since a hostile bid is more likely to succeed when the firm’s performance is poor, it is argued that this threat motivates management to act in manners that maximize shareholder wealth.Nevertheless, a majority of American corporations have classified boards. According to Rosenbaum (1998), 59% of major U.S. public companies elect directors to staggered terms in 1998. Under this provision, the board is divided into separate classes, usually three, with directors serving overlapping multiyear terms. Thus, approximately one-third of all directors stand for election each year, and each director is re-elected roughly once every three years.Proponents contend that this provides a measure of stability and continuity that may not be available if all directors were elected annually, which is presumed to enhancethe firm’s ability to create value. Besides, Wilcox (2002) and Koppes et al. (1999) argue that staggered elections encourage board independence by reducing the threat that a director who refuses to succumb to management will not be re-nominated each year. Furthermore, firms with classified boards may attract better directors because directors, who may dislike going through the election process, can avoid annual re-election. Staggered elections also may enhance shareholder value in takeover situations by allowing the target’s board enough time and the perspective to accurately evaluate bids and solicit competing offers. Thus, the question of whether classified boards benefit or hurt shareholders is largely an empirical matter.Jarrell and Poulsen (1987) study antitakeover charter amendments and find a negative but insignificant average abnormal return for their subsample of 28 classified board announcements. In contrast, Mahoney and Mahoney (1993) find a significantly negative abnormal return for a sample of 192 events. Bebchuk et al. (2002) analyze 92 hostile bids for U.S. corporations between 1996 and 2000. They find that a classified board almost doubles the odds that a hostile target remains independent. They also find that classified boards do not confer higher premiums if the target is acquired. More recently, Bebchuk and Cohen (2005) study the effect of staggered elections on firm value as measured by Tobin’s q. They find that classified boards are associated with a significant reduction in firm value.In spite of these studies, several issues remain unresolved. For instance, are classified boards bad across the board, or do some firms benefit from electing directors to staggered terms? This is an important question because a negative average effect need not imply the absence of situations where such boards are beneficial. Another relevant butpreviously unexplored issue is whether staggered elections promote board stability and a culture of effective long-term strategic planning.Perhaps, the most important outstanding question is why and how classified boards destroy value. Generally, it is presumed that this is because these boards entrench management and reduce director accountability to shareholders. However, if this is the case, there should be other evidence of problems beyond reduced firm value. For example, are classified boards less likely to fire the CEO for poor performance? Are outside directors less effective on classified boards? Do such boards provide CEOs with poorer compensation incentives? Do classified boards deter proxy contests? Do shareholder proposals at firms with classified boards receive greater shareholder support than at firms with non-classified boards? Are classified boards more or less likely to implement shareholder-approved proposals? In short, in what manner, and to what extent, do classified boards insulate directors and top management from shareholders?This paper focuses on these significant issues with a view to enriching the discourse on classified boards. As a starting point, I provide evidence of a negative relation between firm value and classified boards and show that this relation is robust to controls for other takeover defenses. I then extend the analysis to address the issues raised above. First, I test whether classified boards are beneficial in certain situations by focusing on the class of firms that is commonly suggested as likely to benefit most from staggered board elections, that is, those with relatively complex operations. I find no support for this conjecture: Regardless of how I define complexity, classified boards are always negatively related to firm value.Next, I test the hypothesis that staggered elections encourage board stability by relating classified boards to director turnover rates, which I measure as the proportion of1995 directors no longer on the board in 2002. I find that electing directors to staggered terms has no significant effect on board turnover. In addition, there is no evidence that staggered elections enhance board independence, since classified boards are not significantly related to the turnover rate for independent directors.Given these results, I then address the important question of how and why staggered boards destroy value by conducting a series of tests to evaluate the hypothesis that classified boards entrench management and reduce the effectiveness of directors. First, I analyze the effect of staggered boards on the likelihood of chief executive turnover. I find that staggered elections reduce the probability of an involuntary turnover and the sensitivity of turnover to firm performance. The evidence further suggests that staggered elections reduce the effectiveness of outside directors in CEO replacement decisions. Weisbach (1988) shows that CEO turnover is more sensitive to firm performance when a majority of directors are outsiders. I find that this result depends on whether directors are elected to annual or staggered terms. For firms without classified boards, involuntary turnover is indeed more likely when a majority of directors are outsiders. For classified boards, however, an outsider-dominated board does not affect the performance-sensitivity of forced turnover. In related results, I also show that classified boards reduce the sensitivity of CEO compensation to firm performance, deter proxy contests, and are less likely to implement shareholder-approved proposals.My results cast a shadow of doubt on the claim that classified boards protect shareholder interest and enhance the firm’s ability to create wealth. Rather, the evidence suggests that these boards are adopted for managerial self-serving purposes, and that the recent wave of shareholder activism directed at eliminating them may be well justified.The remainder of the paper is organized as follows. In the next section, I describe the sample, methodology, and results of my analysis of the relation between classified boards and firm value. Section 3 considers whether classified boards benefit complex firms, while Section 4 focuses on how staggered elections affect board stability and long-term strategic planning. In Section 5, I focus on the question of how classified boards entrench management, providing evidence on CEO turnover, compensation incentives, proxy fights, and shareholder proposals. Section 6 concludes with a brief summary.2. Classified boards and firm valueconstruction2.1. SampleMy sample is based on the 3,823 definitive proxy statements filed with the U.S. Securities and Exchange Commission in 1995. From this group, I excluded mutual funds, real estate investment trusts, limited partnerships, subsidiaries, and firms with incomplete data in Compustat. This yielded a sample of 2,166 firms. Reading each proxy statement, I identified 1,083 firms that elect directors to staggered terms. I then checked subsequent proxy statements for each firm from 1996 through 2002 to identify those that declassified their boards during this period. There were 32 such firms. Similarly, I examined succeeding proxy statements for firms that practiced annual board elections in 1995 and identified 62 that subsequently classified their boards. I eliminated both groups from the sample to ensure that sample firms either practiced annual or staggered elections throughout the empirical window of this study, thus reducing the sample to 2,072 firms.An important issue in relating firm value to board structure is the potential for a self-selection problem, namely, the possibility of detecting a statistical relation between measures of firm performance and board structure which is a simple reflection of the choice of such structure being the result of performance to begin with. While I discussseveral econometric attempts at addressing this issue in Section 2.4.1, here I discuss sampling procedures aimed at reducing the likelihood of such spurious relation. Specifically, I checked pre-1995 proxy statements of firms with classified boards to determine the year the classified board was adopted and excluded 51 firms that classified their boards after 1990. Since the study covers 1995-2002, this implies that the remaining firms have practiced staggered elections for at least five years prior to the period of my analysis. With this, I hope to mitigate the effects of any performance concerns that might have been associated with the decision to classify the board.Thus, my final sample consists of 2,021 firms. Of these, 1,000 have classified boards while the remaining 1,021 elect directors to annual terms. Virtually all industries are represented in both the classified board and non-classified board sub-samples, and the distribution of firms across broad industry groups is similar for both categories. Thus, my analysis is not likely to suffer from industry-induced biases. Still, all my regressions include two-digit SIC code dummies to control for any remaining industry effects.definitions2.2. VariableI measure firm value using Tobin’s q, which I calculate as the market value of common equity plus the book values of preferred equity and long-term debt divided by the book value of assets. While it is possible to construct more complicated versions of Tobin’s q, Chung and Pruitt (1994) show that this relatively simple version performs quite as well as more sophisticated ones. Recent studies that employ the simple measure of Tobin’s q include Callahan et al. (2003) and Bebchuk and Cohen (2005).Besides staggered elections, other variables are known to affect firm value. I control for these variables to isolate the effect of classified boards. The variables include board size (Yermack, 1996), board composition (Rosenstein and Wyatt, 1990), leadershipstructure (Rechner and Dalton, 1991), insider ownership (Morck et al, 1988),1 outside block ownership (Bethel et al., 1998), independent nominating committee2 (Callahan et al., 2003), and investment opportunities and current profitability (Yermack, 1996). I collect governance data from proxy statements and use the ratio of capital expenditures to total assets as a proxy for the availability of investment opportunities. Following Yermack (1996), I use return on assets, defined as the ratio of operating income to total assets at the beginning of the year, as a measure of current profitability. I obtain the data on capital expenditures, operating income, and total assets from Compustat.Furthermore, I control for leverage because debt may enhance or hinder a firm’s ability to create value, for example, by changing its contracting environment through constraints imposed by debt covenants. Using data from Compustat, I measure leverage as the ratio of long-term debt to total assets. I also include two-digit primary SIC code dummies to control for industry differences and the natural logarithm of total assets to control for differences in firm size.Classified boards are only one of several potentially entrenching mechanisms that may serve as substitutes or complements. Gompers et al. (2003) show that classified boards are positively correlated with their index of 23 other provisions that weaken shareholder rights.3 Thus, I control for these provisions to isolate the effect of classified boards. However, only 1,156 (or 57%) of my sample firms are represented in Gompers et al. (2003); hence, simply including the G-index in my regressions results in a significant1 Following Morck et al. (1988), the empirical corporate finance literature typically uses breakpoints to control for managerial ownership. I employ the same breakpoints as in Morck et al. (1988), i.e., ownership levels of less than 5%, between 5% and 25%, and greater than 25%. My results are invariant to other breakpoints, as well as to a single continuous measure of managerial ownership.2 This variable equals one if the firm has a nominating committee of the board of directors and the CEO does not serve on it, zero otherwise.3 This index, called the G-index, consists of 24 shareholder rights provisions, including whether directors are elected to staggered terms. See Gompers et al. (2003) for full details on the index’s construction.loss of sample firms. I address this difficulty in two ways. First, I collect data on state of incorporation and poison pills (which are two key components of the G-index) for my full sample and include these variables as individual controls. Second, I estimate separate regressions for the 1,156 firms with G-index data, using G-index (excluding classified boards) as a control variable. Results for the latter regressions are similar to those for the full sample and are not reported. Further, in Section 2.4.2, I analyze the robustness of my results to controls for individual takeover defenses included in the G-index.Another important issue is whether staggered elections affect director quality, which may, in turn, affect firm value. Thus, I compare directors on classified and non-classified boards on several dimensions; however, I find no meaningful differences. The typical director serving a staggered term is 59 years old and sits on 0.3 other corporate boards, compared to 58 years and 0.2 boards for those on non-classified boards. Similarly, 10.7% of directors on classified boards are gray, compared to 11.6% of those on non-classified boards. Median ownership by all directors (excluding the CEO) is 5% for firms with classified boards and 7% for those with non-classified boards. The difference in ownership is statistically significant. In spite of these largely insignificant differences, I control for these variables in my regressions.statistics2.3. DescriptiveTable 1 presents full-sample descriptive statistics for the variables described above. Non-governance variables are measured each year from 1995 to 2002 and averaged for each firm. Zhou (2001) shows that cross-sectional variation (rather than within-firm variation) in governance-related variables explain performance differences across firms, since these variables are relatively time-invariant for individual firms. Hence, to reduce the cost of hand-collecting annual governance data from proxystatements, I use values obtained from 1995 proxy filings. As a robustness check, I collect annual data for 215 firms randomly selected from the sample. Results obtained with this group are similar to those for the full sample.[Please insert Table 1 about here]As Table 1 shows, average and median Tobin’s q are 1.38 and 1.00, respectively. The median board has nine members, 60% of whom are unaffiliated with the firm beyond their directorships. The median director is 58.9 years old, and serves on 0.2 other boards. On average, executive officers and directors beneficially own 21.0% of outstanding shares, with a median insider ownership of 13.2%. These numbers are similar to those reported by Holderness et al. (1999). Sixty-two percent of the sample firms have at least one unaffiliated shareholder controlling 5% or more of voting shares. Average and median block holdings are 10.4% and 7.3%, respectively. Table 1 also shows that the median firm has assets totaling $411.0 million (1994 dollars), of which 16.7% is financed with long-term debt. Between 1995 and 2002, it earned an average 13.4% return on assets while spending 4.9% of total assets on new capital investments.analysis2.4. EmpiricalI begin my analysis with univariate comparisons of Tobin’s q for firms with classified boards versus those that elect directors annually. For the full 8-year period, average and median Tobin’s q for classified boards are 1.25 and 0.99, compared to 1.51 and 1.02 for non-staggered boards. The differences are statistically significant at the 1% level. Similarly, average Tobin’s q is significantly lower for classified boards in each of the eight years, with p-values of 0.05 or less. Comparable results obtain in median tests, except that the difference in medians is only significant for 1995, 1996, and 1999.I subsequently estimate regressions controlling for the variables described in Section 2.2 above. The dependent variable in each regression is Tobin’s q. The first regression employs a Fama-MacBeth framework, while the second is a pooled times series cross-sectional regression with White (1980) robust standard errors. The third regression utilizes variables averaged over 1995-2002. Thus, although data for all years are employed, there is only one observation per firm in this regression. Firms are included if they have at least three years of data. Results are presented in Table 2.[Please insert Table 2 about here]As the table shows, the coefficient of classified boards is negative and statistically significant at the 1% level in each regression. In Column 1 (the Fama-MacBeth specification), the coefficient is -0.1815. Thus, classified boards are associated with an 18.15-percentage point reduction in firm value as measured by Tobin’s q. To put this in context, note that average Tobin’s q for the full sample is 1.38 (Table 1); hence, a classified board reduces the typical firm’s q-ratio by 13.15% after controlling for other factors that may affect firm value. Since the market value for the average firm during this period is $6.05 billion, a 13.15% reduction in q-ratio amounts to a $795 million reduction in the typical firm’s market value. If median rather than average values are used, the estimated reduction in market value is $74.6 million. Although less dramatic than the figure based on means, it is still economically significant.I also estimate (unreported) annual cross-sectional regressions for each year in the sample period. The coefficient of classified board is negative and significant in each regression, with p-values of 0.01 or better in all cases. Thus, the results presented above are not driven by any particular year. Rather, classified boards are associated with a significant depression in firm value each year during the entire 8-year period. Theseresults are similar to those reported by Bebchuk and Cohen (2005). Also as reported by these authors, I find a stronger effect among firms with charter-based classified boards relative to those with bylaws-based classified boards: -0.2017 compared to -0.1390.2.4.1. Possible self-selection problemA potential difficulty with the above results is the possibility of self-selection, since poorly performing managers may select classified boards as a means of protecting themselves from takeover related discipline. If poor performers adopt staggered elections, then cross-sectional regressions like the ones reported here will depict a negative relation between classified boards and firm value, even though this is simply because poor performers choose to classify their boards.As discussed in Section 2.1, I require firms to practice staggered elections for at least five years before admitting them to the sample to circumvent this problem. This is based on the logic that, several years after adopting a classified board, it seems more plausible that performance variation is due to board classification. A reverse causation story where firms institute staggered elections because they expect poor performance five to thirteen years later seems unnatural.Nevertheless, I perform several additional tests to address this concern. First, I note that all classified boards in my sample were adopted by 1990, and that Morck et al. (1989) show that hostile takeovers in this period were often preceded by poor financial performance. Consequently, I control for prior performance using two alternative variables: operating profitability as measured by return on assets and Tobin’s q, both averaged over 1985-1989.Secondly, I partition the sample into quartiles based on Tobin’s q around the time the board was classified. Again, since all classified boards in my sample were adopted by1990, I base the partition on average q-ratio over 1985-1989. I classify firms with q-ratios higher than the third quartile during this period as historical top performers. Mean and median q for this group during 1985-1989 are 3.13 and 2.16, respectively, compared to 1.42 and 1.00 for the full sample. The intuition is that firms that classified their boards in this group could not have done so because of poor performance, since they were top performers around the time they classified their boards. Thus, a subsequent negative relation between firm value and classified boards among these firms will suggest that the result does not simply portray the effects of a self-selection problem. Finally, I employ 3SLS to estimate a system of equations in which Tobin’s q and classified boards are jointly determined. I use the (natural logarithm of the) number of shareholders and historical Tobin’s q, both averaged over 1985-1989, as instrumental variables in first stage regressions. Results of the abovementioned tests are similar to those in Table 2, and are not presented to conserve space. In particular, classified boards remain significantly negatively associated with Tobin’s q, with p-values of 0.05 or better.I also perform additional tests by focusing on two relatively exogenous circumstances surrounding the adoption of classified boards. First, I consider whether classified boards have a different effect on firm value among firms incorporated in Massachusetts. On April 18, 1990, Massachusetts enacted legislation establishing staggered elections as the default mode for electing directors to the boards of public firms incorporated in that state. Firms were permitted to opt out of this provision, either by an action of the board or by shareholder approval at an annual meeting. My sample contains52 firms incorporated in Massachusetts, of which 38 have classified boards.I estimate regressions like those in Table 2 to test whether classified boards have a different effect on value for Massachusetts firms. In one regression, I use the full sampleand include a new variable interacting Massachusetts incorporation and classified boards. In another, I include only Massachusetts firms with classified boards alongside firms with non-classified boards. In both regressions, I find no significant relation between classified boards and value for Massachusetts firms, with p-values of 0.27 and 0.25, respectively. Thus, it appears that classified boards have no effect on firm value in Massachusetts; alternatively, it is possible that the lack of significance is due to the small number of Massachusetts firms with classified boards in my sample.4 As a further robustness check, I estimate regressions excluding Massachusetts firms. In these regressions, the classified board variable is negative and statistically significant at the 1% level.Next, I examine the impact of classified boards on firm value among firms with such boards at their IPO dates, based on the logic that the decision to adopt a classified board is less likely to be endogenous for these firms. Using data from the Center for Research in Security Prices (CRSP) to determine IPO dates, I identified 71 firms with classified boards when they went public. I then estimate regressions similar to those for Massachusetts firms. I find that classified boards are significantly negatively related to firm value for these firms, although the coefficient is smaller in absolute terms (-0.11 vs. -0.17) than for other firms with classified boards.Overall, the results presented in this section do not support a self-selection argument. Rather, they are consistent with classified boards hindering the effectiveness of corporate governance and hurting the firm’s ability to create value for its shareholders.4 I checked the Business Corporation Act of each of the 50 states and the District of Columbia for its provisions on classified boards. As it turned out, every other state, as well as the District of Columbia, permits but does not require corporations to have classified boards. Consequently, the Massachusetts analysis cannot be extended to any of the other states.2.4.2 Exploring the impact of other takeover defensesThe effectiveness of classified boards in entrenching management may depend significantly on other takeover defenses available to the firm. For example, by blending the necessity for at least two annual meetings to remove the board with the ability to dilute the holdings of an unwanted bidder, a classified board – poison pill combination practically ensures that a firm can only be acquired with the consent of its directors. Similarly, combining staggered elections with provisions authorizing blank check preferred stock or limiting the power of shareholders to call special meetings or act by written consents potentially increases the entrenchment effects of classified boards. Thus, I examine the association between classified boards and other takeover defenses and the robustness of the relation between firm value and classified boards to this association.Using data from Gompers et al. (2003), I find that the most widespread takeover defense adopted by classified boards is the ability to issue blank check preferred shares, authorized at 90.7% of these firms. Other common defenses are poison pills (61.3%), limits on special meetings (44.5%), limits on shareholder actions by written consents (43.2%), supermajority voting (28.1%), and dual class stock (5.7%). Virtually all (99.7%) are protected by at least one of these takeover defenses.I test the sensitivity of my results to these defenses by estimating Fama-MacBeth regressions using each defense in addition to, in place of, and interacted with, classified boards. Poison pill regressions are estimated over the full sample, while regressions for the other defenses are estimated over the set of firms with available data.5 Each regression controls for all the variables in the main regressions reported in Table 2. Results are presented in Panel A of Table 3. As the table shows, results are robust to the 5 As stated earlier, I have takeover defenses data (from Gompers et al. (2003)) for 1,156 of the 2,021 sample firms.。

管理学基础

我们都承认微软公司的成功，那么请问：（1）你认为比尔盖茨是一个成功的管理者吗? （2）管理者应该是一个什么样的人物呢?
成功的管理者没有固定的模式。管理者可以是不满18岁的未成年人，也可以是年逾8旬的老人，如今女性管理者已屡见不鲜。可以看到，世界各国的管理者都在做着他们的管理工作。
Efficiency
Resource Usage
Effectiveness
Goal Attainment
Low Waste
High Attainment
Management Strives For:
Low resource waste (high efficiency) High goal attainment (high effectiveness)
宏观角度—贪污腐败、商业道德缺失、暴力事件、金融危机、宏观经济调控、城市管理失控（危机管理）、医疗管理（高收费）等等微观角度—行政效率低下、企业改革、收入管理（灰色、黑色收入）等
管理的范围已经由以前的单一的企业管理扩展到国家以及各个行业的管理，方式也发生了很大的变化。
泰罗F. Taylor：管理就是要“确切地知道要别人干什么，并注意他们用最好的办法去干。”
第第第第第第六五四三二一篇篇篇篇篇
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创控邻组决新制导织策总
论
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管理学概述
INTRODUCTION ADMINISTRATION
• • • • •
管理的概念管理的特征管理者的性质及职能管理的基本问题管理环境
管理概念管理特征
管理概述
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Unit2Text1ADefinitionofManagement

Unit2Text1ADefinitionofManagementUnit 2 Text1 A Definition of ManagementManagement is a complex process. Through management. managers coordinate the work of people with other resources. More formally, management is defined as the process of effectively and efficiently using an organization’s resources to achieve objectives through the functions of planning, organizing, leading, and controlling. Successful management requires an understanding of how a firm operates. Managers must comprehend the individual components if a firm’s a ctivities in order to complete their tasks properly. For example, a manager must understand how the company’s products--goods or services –are produced, financed, and distributed.管理工作是项复杂的过程，通过管理，管理者可以使人的工作与其他资源协调一致。

说的正式点，管理工作就定义成一项有效性和高效性地利用公司资源，通过制定计划，组织管理，领导监督和控制运作等功能，更好地实现公司目标。

参考文献

：28-29。

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managerial accounting for decision making

managerial accounting for decisionmakingManagerial accounting for decision making is a crucial aspect of business management. It involves the use of financial and non-financial information to support managers in making informed decisions that can impact the organization's performance and success.One of the primary roles of managerial accounting is to provide managers with financial information that is relevant and useful for decision-making. This includes information on costs, revenues, profits, and cash flows. Managerial accountants use various techniques and tools, such as budgeting, variance analysis, and cost allocation, to provide managers with this information.In addition to financial information, managerial accounting also provides non-financial information that can be important for decision-making. This includes information on customer satisfaction, employee productivity, and product quality. Managerial accountants use techniques such as balanced scorecard and key performance indicators (KPIs) to provide managers with this information.Managerial accounting for decision making also involves the use of financial models and projections. Managerial accountants use these models to analyze different scenarios and their potential impact on the organization's performance. This helps managers make informed decisions about strategies, investments, and operations.Overall, managerial accounting for decision making is an essential tool for managers. It provides them with the information and analysis they need to make informed decisions that can impact the organization's performance and success. By using financial and non-financial information, financial models and projections, and other tools and techniques, managerial accountants help managers make decisions that are in the best interests of the organization.。

管理能力作为一种资源价值创造

MAKING THE MOST OF WHAT YOU HAVE: MANAGERIAL ABILITY AS A SOURCE OF RESOURCE VALUE CREATION
TIM R. HOLCOMB,1 * R. MICHAEL HOLMES JR.,2 and BRIAN L. CONNELLY3
proﬁles, identifying important resource characteristics that explain differences in ﬁrm performance (Peteraf, 1993; Peteraf and Barney, 2003). Despite intuitive appeal, this reasoning has proEfﬁcient production with heterogeneous resources duced equivocal results (see Newbert, 2007 for a is a result not of having better resources review), leading some to criticize resource-based but in knowing more accurately the relative theory as overly focused on the characteristics productive performances of those resources of resources (e.g., Priem and Butler, 2001) and (emphasis included in the original, Alchian ‘remarkably na¨ ive’ about how they are used (e.g., and Demsetz, 1972: 793). Barney and Arikan, 2001: 175). More recently, scholars have added that while owning or having access to valuable and rare resources is necessary Management research has a long history of using for competitive advantage, they must be effectively resource-based theory to explain differences in managed and synchronized to realize a competitive organizational outcomes (Barney, 1991; Barney, advantage (e.g., Hansen, Perry, and Reese, 2004; Wright, and Ketchen, 2001). To do so, scholars Kor and Mahoney, 2005; Mahoney, 1995). Howfocus attention on the heterogeneity of resource ever, despite recent efforts to integrate managerial processes into a theory of resource management Keywords: managerial ability; resource management; (e.g., structuring, bundling, and leveraging; see value creation; resource productivity; synchronization Sirmon, Hitt, and Ireland, 2007), scholars work*Correspondence to: Tim R. Holcomb, College of Business, ing in the resource-based tradition have not fully Florida State University, Tallahassee, FL 32306-1110, U.S.A. explored the actions ﬁrms take to create and sustain E-mail: tholcomb@

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- and his own effort e (e in [0,1]). Effort e costs him a disutility (e) ((.) strictly convex).
• The manager can quit in any period few punishment opportunities. Penalty P if antitrust intervention and shareholders can prove managerial misbehavior?
Some literature on managerial incentives and collusion
• Spagnolo (2000, 2019) has shown how particular, usual, incentive schemes for managers (stocks, bonus plans, etc.) can help sustain collusion even at very low discount factors.
- K(e), for K=M,D, if one of the other firms has chosen D.
If several firms deviate, competition: D(e) = C(e).
One has D(e) > M(e) > C(e) (= D(e)) > M(e).
• Special case: No direct interaction between effort and collusion
K = e + K
with D > M > C = 0.
(e.g., effort affects fixed costs).
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion
collusion. Impact for cartel deterrence and liability? Examine the
impact of antitrust tools along the way.
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion
4. Is managerial disqualification (as imposed in the UK) useful (given that managers in colluding firms may be compensated for this risk?).
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion
• The game is repeated infinitely.
Discount factor: for managers, s for shareholders
(if managers stay for short periods, incentive issues are reinforced).
• Chen (2019) studies how delegation to an agent can improve a cartel’s sustainability.
• Here, different issue: interplay between market conduct and effort incentives moral hazard on two variables.
The model: Antitrust intervention
• The antitrust authority (AA) investigates and finds evidence of
collusion with probability .
• AA imposes a fine F on convicted firms, and possibly a personal fine or jail sentence J on managers in convicted firms (if personal liability).
collusive agreement (if one refuses, competition). Communication leaves evidence. 2. Each manager is free to implement the collusive agreement, or deviate. He chooses market conduct and effort. A°: after a deviation, all firms revert to competition forever (harshest possible punishment).
Main idea
• The objectives of owners and those of decision-makers within a firm may not be aligned.
• Obtaining high profits without “misbehaving” (e.g., colluding) requires more effort from managers (and high executives) – which is costly.
1. The model
• N firms are on the same market. • In each firm, shareholders offer a (non observable) incentive
wage w to a manager (or top executive). • In each period, the manager privately chooses - the firm’s market conduct K (K = C, M, D),
informed employees reporting evidence as to collusion. What if the informed employee is the decision-maker? Perverse incentives?
3. Desirability of jail sentences? Traditionally viewed as inefficient by economists, although some practitioners see them as quite effective (e.g., Hammond, 2019). Wills (2019).
economic literature has focused on corporate LPs (e.g., Motta and Polo, 2019, Spagnolo, 2019, Aubert, Rey and Kovacic, 2019, Harrington, 2019,…). • What is the exact role of an individual LP? • In the US, the use of effective internal compliance programs grants a reduction in liability. • One must open “a little” the black box of the “firm”.
• What impact for antitrust enforcement?
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion
Internal conflicts of interests
• Fraud is widespread even at top level (cf. Price Waterhouse Cooper, 2019).
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion
The model: Timing
• In each period, 1. Managers first choose whether to meet and communicate on to a
Remark: abstract from moral considerations, and from coordination issues between firms.
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion
• When effort is private information, managers may substitute effort and collusive behavior.
• Does this faciliate collusion? Can it be prevented by “honnest” shareholders?
Managerial Effort Incentives and Market Collusion
Cécilof Bordeaux (GREThA) and Toulouse School of Economics (LERNA)
CLEEN Workshop – June 13, 2019
Introduction – Model – Benchmarks – Managers – Antitrust – Conclusion