Reaffirming the importance of managerial discretion in corporate governance: a comment on Andersen (2017)

Abstract

PurposeThe purpose of this study is to refute the work of Andersen (2017) by suggesting a different theoretical view and to argue that the concept of managerial discretion is one of the core dimensions that cannot be discarded when studying corporate governance.Design/methodology/approachThis paper uses theoretical frameworks from recent literature, definitions and empirical studies on the concept of managerial discretion and corporate governance.FindingsSeveral studies have empirically tested and measured the concept of managerial discretion, some have provided validity and reliability of the concept and others have showed the direct impact of discretion on firm performance.Practical implicationsResearch on managerial discretion provides owners and board of directors a clear advice on how much discretion can be granted to top executives by taking into consideration the different dimensions of the external and internal environment.Originality/valueThis paper concludes that corporate governance research will not improve if it abandons the concept of managerial discretion.