Take Action

Home | Faculty & Research Overview | Research

Research Details

Managerial Entrenchment, Reputation Building and the Optimality of Short-Term Projects, Journal of Accounting, Auditing and Finance

Abstract

In this paper, we demonstrate that informational asymmetries within a firm along with managerial labor market concerns can jointly result in investment myopia being equilibrium behavior. In contrast to earlier studies (like that of Shleifer and Vishny [1989]), we find that in the presence of both reputation and entrenchment incentives, managers invest in long-term projects for reputation building and short-term projects to entrench themselves. Further, we establish conditions under which delegating project selection is optimal, even though it requires that the owner tolerate short-term project selection. Finally, we present several empirical implications of our analysis.

Type

Article

Author(s)

Swaminathan Sridharan

Date Published

1995

Citations

Sridharan, Swaminathan. 1995. Managerial Entrenchment, Reputation Building and the Optimality of Short-Term Projects. Journal of Accounting, Auditing and Finance. 10(3): 565-585.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more

Take Action