The Fallacy of New Business Creation as a Disciplining Device for Managers
This paper investigates a negative externality of new business creation. When being perceived as a good manager is a necessary condition to establish a firm in the future, we show that a priori talented managers may indulge in undertaking risky projects now. Indeed, such a choice renders more difficult the updating of believes process regarding their actual types. Unfortunately, this in turn leads them to perform less effort, which comes at the expense of economic efficiency. Hence, the career concerns we examine do not discipline good managers. However, we show that employers can reduce managerial slack by resorting to financial markets monitoring.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.