Bureaucracy as a Mechanism to Generate Information
Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); University of Chicago - Polsky Center for Entrepreneurship; European Corporate Governance Institute (ECGI)
CRSP Working Paper No. 477
Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labelled "bureaucratic" and inefficient. This paper argues that the thin line between efficient management practices and inefficient bureaucracy is crossed to curb managerial agency costs in a multi-layer hierarchy. The model predicts that bureaucracy increases with the frequency of managerial turnover, and it establishes a link between bureaucracy, incentive schemes, and leverage in a cross-section of firms.
Number of Pages in PDF File: 29
JEL Classification: D23, L23, G32working papers series
Date posted: May 20, 2003
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