Bureaucracy as a Mechanism to Generate Information

29 Pages Posted: 20 May 2003

See all articles by Walter Novaes

Walter Novaes

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics

Luigi Zingales

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: May 2003

Abstract

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.

JEL Classification: D23, L23, G32

Suggested Citation

Novaes, Walter and Zingales, Luigi, Bureaucracy as a Mechanism to Generate Information (May 2003). CRSP Working Paper No. 477, Available at SSRN: https://ssrn.com/abstract=124548 or http://dx.doi.org/10.2139/ssrn.124548

Walter Novaes

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
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Brazil

Luigi Zingales (Contact Author)

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

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European Corporate Governance Institute (ECGI) ( email )

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