Bureaucracy as a Mechanism to Generate Information

30 Pages Posted: 8 Jun 2003 Last revised: 5 Sep 2022

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)

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Date Written: June 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 labeled 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.

Suggested Citation

Novaes, Walter and Zingales, Luigi, Bureaucracy as a Mechanism to Generate Information (June 2003). NBER Working Paper No. w9763, Available at SSRN: https://ssrn.com/abstract=414261

Walter Novaes

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

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Luigi Zingales (Contact Author)

University of Chicago - Booth School of Business ( email )

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