Understanding Corporate Governance Through Learning Models of Managerial Competence

32 Pages Posted: 14 Apr 2014

See all articles by Benjamin E. Hermalin

Benjamin E. Hermalin

University of California, Berkeley

Michael S. Weisbach

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2014

Abstract

A manager's shareholders, board of directors, and potential future employers are continually assessing his ability. A rich literature has documented that this insight has profound implications for corporate governance because assessment generates incentives (good and bad), introduces assorted risks, and affects the various battles that rage among the relevant actors for corporate control. Consequently, assessment (or learning) is a key perspective from which to study, evaluate, and possibly even regulate corporate governance. Moreover, because learning is a behavior notoriously subject to systematic biases, this perspective is a natural avenue through which to introduce behavioral and psychological insights into the study of corporate governance.

Suggested Citation

Hermalin, Benjamin E. and Weisbach, Michael S., Understanding Corporate Governance Through Learning Models of Managerial Competence (April 2014). NBER Working Paper No. w20028. Available at SSRN: https://ssrn.com/abstract=2424599

Benjamin E. Hermalin (Contact Author)

University of California, Berkeley ( email )

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Michael S. Weisbach

Ohio State University (OSU) - Department of Finance ( email )

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Columbus, OH 43210-1144
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI) ( email )

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Belgium

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