مقاله انگلیسی رایگان در مورد انحراف مدیریتی، رقابت بازار محصول و عملکرد شرکت – الزویر 2018

We derive the conditions under which a manager will divert and how managerial diversion affects product market performance and firm profits. Our model predicts that managerial diversion is more likely to occur and leads to more aggressive product market behavior in a firm with weak incentives and corporate governance. In these firms, the relation between managerial diversion and firm profits is inverse U-shaped. Chinese state-owned manufacturing firms are used to test our theoretical model, and we find supportive evidence.

Introduction

When ownership and management are separated, the incomplete nature of contracting and monitoring inevitably creates room for managerial opportunism, allowing managers to pursue their private benefits at shareholders’ expense. Prior literature has examined various mechanisms through which managers may divert value from shareholders, including self-dealing, insider trading, embezzlement, perquisites, etc. (see Shleifer and Vishny (1997) for a survey). For example, Shleifer and Vishny (1997) argue that, when contracts are incomplete and managers possess more expertise than shareholders, residual rights of control are typically held by the managers, giving them enormous latitude for self-interested behavior. Hand and Rogow (1982) suggest that the imperfection of capital markets make insiders more likely to divert the firm’s financial and managerial resources from productive uses and paralyze decision-making. Extending the current literature, this paper studies when managers engage in diversion and its impact on product market performance and firm profits, using a two-stage dynamic game model. While conventional wisdom suggests that managerial diversion is a rent-seeking behavior that should be disapproved and regulated (Bebchuk & Jolls, 1999; Grossman & Hart, 1980; Jensen, 1986; Jensen & Meckling, 1976; Meulbroek, 1992; Shleifer & Wolfenzon, 2002), the existing literature in economics and finance has not yet reached consensus. Easterbrook and Fischel (1991), for example, suggest that managerial diversion is just another form of managerial compensation and, therefore, has no impact on shareholder value. Fama (1980) argues that managerial diversion can be a superior way to incentivize shareholder value creation, provided that its costs are lower than other forms of incentive compensation. He (2006) shows that managerial diversion may occur in equilibrium, and that such diversion may not hurt shareholders if it can incentivize the manager to exert more effort. He and Ho. (2011) argue that when monitoring is inefficient and expensive, the opportunity costs of monitoring are too high. Consequently, it is in the shareholders’ best interest to omit monitoring and allow managers to divert firm resources. Congruously, Bruno and Claessens (2010) show that “over-monitoring” or a straight-jacket of many corporate governance rules can generate costs, harm managerial initiative, and lead to relatively lower returns and valuations. Empirically, Roulstone (2003) finds that firms with more stringent rules on insider trading around quarterly earnings announcements tend to provide their executives with higher total and incentive pay, arguably to compensate managers for potential losses due to such restrictions. Using hand-collected data on perks in Chinese-listed companies, Zhang, Song, and Ding (2015) find strong empirical evidence that perks can motivate managers to work hard and, thus, add to firms’ value (incentive view), which is more likely to occur in firms with moderate ownership concentration. Emphasizing the potential role of diversion as a form of compensation, this strand of literature argues that restrictions on managerial diversion are totally unnecessary.