When China reformed state-owned enterprises, it tried a new approach to choosing managers: it put managerial jobs up for auction. The bids for the jobs consisted of promises of future profit streams that the managers would generate and then deliver to the state. In cases where the incumbent manager was the winning bidder, firm productivity tended to increase dramatically. When outside bidders won, there was little productivity improvement. If incumbent managers were not generally more qualified, how can you explain this result?
Answer to relevant QuestionsWhen Kraft recently bid $16.7 billion for Cadbury, Cadbury's market value rose, but Kraft's market value fell by more. What does this tell you about the value-creating potential of the deal?Multiple-Choice Questions1. When economists speak of "marginal," they meana. Opportunity.b. Scarcity.c. Incremental.d. Unimportant.2. Managers undertake an investment only ifa. Marginal benefits of the investment are greater ...Multiple Choice Questions1. Which of the following is an example of moral hazard?a. Reckless drivers are the ones most likely to buy automobile insurance.b. Retail stores located in high-crime areas tend to buy theft ...Often building supply retail store employees become friendly with their customers (building contractors) and will do them favors. For example, they might charge customers for 90% of the flooring material being purchased, or ...Stores that sell wedding dresses do not typically permit photos, and do not have tags in the dresses that would identify the manufacturer and style type. What is the purpose of these rules? Suggest one other way of ...
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