Managerial Career Concerns and Investments in Information

Posted: 23 May 2001

See all articles by Todd T. Milbourn

Todd T. Milbourn

Washington University in Saint Louis - Olin Business School

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business; European Corporate Governance Institute (ECGI)

Richard L. Shockley

Indiana University - Kelley School of Business - Department of Finance

Abstract

We extend the "implicit incentives" literature by analyzing how career concerns impact a risk-neutral manager's decision of how much to learn about a project before investing in it. The manager has unknown ability that determines the probability with which a good project is available, so the market updates ability assessments from project outcomes. While project choice is efficient in equilibrium, an unobservable investment in the precision of project evaluation allows the manager to control the probabilities of future reputational states. This distorts his investment in precision above first best when project payoffs can be observed only on accepted projects.

Suggested Citation

Milbourn, Todd T. and Thakor, Anjan V. and Shockley, Richard L., Managerial Career Concerns and Investments in Information. Available at SSRN: https://ssrn.com/abstract=268004

Todd T. Milbourn (Contact Author)

Washington University in Saint Louis - Olin Business School ( email )

1 Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-6392 (Phone)
314-935-6359 (Fax)

HOME PAGE: http://www.olin.wustl.edu/faculty/milbourn/

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Richard L. Shockley

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-9404 (Phone)
812-855-5875 (Fax)

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