Game Analysis of Managers' Selection of Long or Short-term Investment Project from the Perspective of Managerial Entrenchment

Abstract

Abstract:

Managerialentrenchment hypothesis is a further deepening of the principal-agent theory, and both of them have different perspectives on the analysis of manager agency problem. This paper reveals the different types of managers' choice of long and short-term investment project behavior under the defensive motivation from the perspective of managerial entrenchment by building the incomplete information game model of managers and board of directors and analyzing the potential Bayesian equilibrium. The study finds that the highly capable managers and the lowly capable in defensive motivation tend to choose the short-term investment projects to maintain their own interests and this conclusion provides a new perspective in explaining the motivation of the inclination in enterprise managers' short-term investments.

Key words: managerial entrenchment, game model, investment myopia, Bayesian equilibrium

Li Bingxiang, Qiao Jianmin, Niu Xiaoqin, Tao Rui. Game Analysis of Managers' Selection of Long or Short-term Investment Project from the Perspective of Managerial Entrenchment[J]. , 2019, 31(1): 197-205.

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