Enjoying the Quiet Life? Corporate Governance and Managerial Preferences
2003/09/23 by Marianne Bertrand, Sendhil Mullainathan · 3,938 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Business #Corporate Finance and Governance #Corporate Insolvency and Governance #Corporate governance #Economic growth #Economics #Exploit #Finance #Law #Market economy #Norm (philosophy) #Political science #Productivity #Profitability index #QUIET #Shareholder #State (computer science)
paper · doi:10.1086/376950
published in Journal of Political Economy 111(5), 1043-1075 (University of Chicago Press)
openalex publication_date 2003/09/23 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/06
Abstract
Much of our understanding of corporations builds on the idea that managers, when they are not closely monitored, will pursue goals that are not in shareholders’ interests. But what goals would managers pursue? This paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences. We use plant‐level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws. We find that when managers are insulated from takeovers, worker wages (especially those of white‐collar workers) rise. The destruction of old plants falls, but the creation of new plants also falls. Finally, overall productivity and profitability decline in response to these laws. Our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life.
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