Monitoring, Moral Hazard and Turnover

No 130124, Department of Economics Working Papers from The University of Texas at Austin, Department of Economics

Abstract: I study the effects of monitoring on turnover of executives, when the executives' early actions have permanent effects on future outcomes. I consider an infinite-horizon environment where the expectation about the potential successor's effort is endogenous. As a result, the incentive to replace the incumbent is endogenous. In a stationary Markov equilibrium the relationship between monitoring and turnover is hump-shaped. The model sheds light on dynamic agency problems when agent's initial effort has persistent effects, and on the role of reputation in models with endogenous turnover.

Keywords: learning; reputation; political instability; CEO turnover; principal-agent (search for similar items in EconPapers)
JEL-codes: C73 D72 D82 D83 (search for similar items in EconPapers)
Pages: 32 pages (w/o appendix)
Date: 2009-11, Revised 2012-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://sites.google.com/site/jacekrothert/research/rothert-monitoring.pdf Revised version, 2012 (application/pdf)
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Journal Article: Monitoring, moral hazard, and turnover (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:tex:wpaper:130124

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