Corporate Rent-Seeking and the Managerial Soft-Budget Constraint

This paper seeks to expand on two topical strands in Government Finance and Political Science literature, rent-seeking and the soft-budget constraint, so as to bring forth a strong linkage between them in corporate governance environments. It hopes to accomplish this target by setting up a distinctive framework of analysis that hinges on incremental cash flows. Firstly, it claims that both rent-seeking behavior and the soft-budget constraint are worthy of being applied to corporate governance learning and practice. Secondly, the paper contributes to focus on cash-flows reliability and managers' accountability. Thirdly, it is shown how conflicts of interest underlie rent-seeking behavior, and how the latter relates to the soft-budget constraint