Herding文献-Herding over the career.pdfVIP

Economics Letters 63 (1999) 327–333 Herding over the career Christopher N. Averya , *, Judith A. Chevalierb aKennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138, USA b Graduate School of Business, University of Chicago, Chicago, IL, USA Received 31 August 1998; accepted 30 November 1998 Abstract We develop a model of decision-making when managers have private information about their abilities. With no private information about ability, managers ‘herd’. However, with sufficient private information, managers inefficiently ‘anti-herd’. The model potentially illuminates recent empirical work on career concerns.  1999 Published by Elsevier Science S.A. All rights reserved. Keywords : Herding; Career concerns; Managerial incentives JEL classification : D20; J41 1. Introduction We develop a model of managerial decision-making when managers have private information about their abilities. This model potentially illuminates the growing empirical literature examining changes in herding behavior over the course of the career (see, for example, Lamont (1995), Hong et al. (1998), and Chevalier and Ellison (1998)). These papers are surprisingly consistent in their findings; younger decision-makers ‘herd’ more than their older counterparts. However, these results are difficult to interpret because existing theoretical models do not make predictions about whether herding should increase or decrease over the career. A manager’s incentives to herd evolve through her career in response to her information relative to that of the market. Early in her career, a manager may have no private information about her ability. Scharfstein and Stein (19