By T.V.S. Ramamohan Rao
Discretionary Managerial Behavior provides a quantification of the managerial habit inside decentralized organisations. the amount offers useful insights into the inner functioning of the company, the relationships among the managers at various organizational echelons, and the conditioning results of the organizational controls and the industry setting exterior to the enterprise. It varieties a uncomplicated contribution to the theoretical modeling, methodological and estimation systems, and empirical insights into the character and operation of managerial discretion in decentralized businesses.
either theoretical and empirical literature of organizational economics haven't come to grips with the choice making approach in such agencies. With this in standpoint the quantity describes 4 essentially new contributions. It provides:
- an method of defining proximate ambitions of managers on the divisional degrees in a decentralized association and the coordination by way of managers at better degrees,
- an method of constructing a modelling framework from a valid theoretical standpoint with a view to replicate the postulated habit,
- an method of defining an estimation strategy to operationalize either (a) and (b) in a particular empirical context, and
- the richness of empirical insights which remained elusive for over thirty years. As such this learn is a vital step to make primary growth within the zone of interface among company coverage and microeconomic thought.
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Extra resources for Discretionary Managerial Behavior
Sample text
An optimal balance between information acquisition and designing control mechanisms as against the efficiency gains of delegation of power is subjective and very dynamic. In particular, it should be acknowledged that the divisional managers, especially in a functionally specialized enterprise, do not know how their actions contribute to the overall profit of the firm. The delegation of responsibility should specify the proximate objectives that they are expected to pursue. It is the role of the CEO or the STAFF in a M-form to see how best they can be defined to achieve the overall objectives of the enterprise.
1. The managerial team must consider this as a constraint on their decision making. t THE DIVERSIFICATION DECISION However, greater diversification, when implemented through a divisionalized organizational structure, provides them greater prestige and power. It may also have a salutary effect on the stability of the market share of the firm. The managerial team is likely to place a positive value on these objectives while keeping the market value constraint in perspective. This is represented as the U-curve in Fig.
Instead they may make the management share the risk by offering a part of the common stock to them. See, for instance, Glazer and Israel (1990). (b) Since the managers are generally risk averse they may not undertake even value increasing investments if there is any degree of business risk. One way to reduce agency costs and induce them to increase such investments is to offer them a stock ownership. See, for instance, Benston (1985), Murphy (1985), and Agrawal and Mandlekar (1987). However, as managerial shareholding increases they gain control and tend to divert resources away from value maximization.