The first part of the paper analyses the optimal decision rule of manager who is able to transfer into his own hands a part of the output of a firm set up with foreign capital. It is shown that in a two-period framework with incomplete information about the nature of the manager, a rational expectation equilibrium exists where managers’ behaviour and investors’ expectations are mutually consistent. In particular, some yound managers may aim at building a reputation of an honest person, then behave dishonestly when getting old. The global performance of an economy hosting a large number of managers is investigated in the second part of the paper.
BESANCENOT, D. et VRANCEANU, R. (2002). Manager Honesty and Foregin Investment in Developing Countries. Research in Economics, pp. 231-250.