Managerial Autonomy, Disagreement and Investment Policy: Evidence from the Movie Industry
Global Economy and Finance JournalVol. 9. No. 1. , March 2016, Pages: 11 – 26
Managerial Autonomy, Disagreement and Investment Policy: Evidence from the Movie IndustryManagers 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