The Strategic Choice of Managers and Managerial Discretion

29 Pages Posted: 10 Apr 2002

See all articles by Xiangkang Yin

Xiangkang Yin

Deakin University; Financial Research Network (FIRN)

Multiple version iconThere are 2 versions of this paper

Date Written: 2001

Abstract

Managerial discretion is likely to be beneficial to shareholders because of strategic cross-effects in an oligopoly. In certain circumstance, shareholders deliberately keep certain managerial discretion in equilibrium even the reduction of managerial discretion is cost free. It is found that positive effects of managerial discretion on profits can only be created by power-building (shirking) managers if the market prevails quantity (price) competition. In comparison with conventional Cournot (Bertrand) model, quantity (price) competition with the separation of owners and managers leads to greater (smaller) outputs, lower (higher) prices and less (more) profits.

Keywords: Corporate Governance, Agency Problem, Managerial Monitoring and Compensation, Managerial Discretion, Oligopoly

JEL Classification: G30, L20

Suggested Citation

Yin, Xiangkang, The Strategic Choice of Managers and Managerial Discretion (2001). Available at SSRN: https://ssrn.com/abstract=301472 or http://dx.doi.org/10.2139/ssrn.301472

Xiangkang Yin (Contact Author)

Deakin University ( email )

Melbourne, Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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