Understanding Corporate Governance Through Learning Models of Managerial Competence

Shareholders, the board of directors, and potential future employers are continually assessing any CEO’s quality. As documented by an extensive literature, such assessment plays a critical role in corporate governance because it generates incentives (good and bad), introduces assorted risks, and affects the various battles that rage among the relevant actors for corporate control. Consequently, assessment (or learning) is a key perspective from which to study, understand, and possibly even regulate corporate governance. Moreover, because learning is a behavior notoriously subject to systematic biases, assessment is a natural avenue through which to introduce behavioral and psychological insights into the study of corporate governance.