Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129546
Authors: 
Engert, Andreas
Goldlücke, Susanne
Year of Publication: 
2013
Series/Report no.: 
Working Paper Series, Department of Economics, University of Mannheim 13-04
Abstract: 
Should managers be liable for ill-conceived business decisions? One answer is given by U.S. courts, which almost never hold managers liable for their mistakes. In this paper, we address the question in a theoretical model of delegated decision making. We find that courts should indeed be lenient as long as contracts are restricted to be linear. With more general compensation schemes, the answer depends on the precision of the court's signal. If courts make many mistakes in evaluating decisions, they should not impose liability for poor business judgment.
Subjects: 
business judgment rule
manager liability
delegated decision-making
JEL: 
K13
K22
M53
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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