Managerial Autonomy, Disagreement and Investment Policy: Evidence from the Movie Industry

Managers may seek autonomy because they disagree
with investors on what course of action will maximize
a project’s returns. Alternatively, managers may want
autonomy to allow them to extract private benefits
from the project. I examine managerial motives for
seeking autonomy using rich ex post project-byproject
data for a comprehensive sample of projects in
the movie industry. My findings are consistent with a
competitive equilibrium in which managerial autonomy
does not distort investment efficiency. Specifically,
managers seeking autonomy are matched with
projects where disagreement between managers and
investors is more likely. Similarly, managers without
autonomy are matched with projects where
disagreement is less likely to arise and such projects
fetch lesser private benefits to managers.

Field of Research: Agency Problems, Disagreement Models, Movie Industry

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