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Does corporate governance structure matter for firm value? We develop a model in which the allocation of control rights between shareholders and managers (“governance structure”) affects managers’ incentive to invest (strong governance tightens managerial freedom and weak governance loosens it), and firms’ investment decisions are linked through a market for resources.
We show that in a competitive equilibrium, which is socially efficient, corporate governance is irrelevant to firm value even in the presence of agency costs and incomplete markets. Our analysis therefore provides an important benchmark against which the effects of governance structures could be evaluated.
Recent research shows that a high wage gap between managers and workers identifies better-performing firms, but the stock market does not seem to price...
This paper develops a theory of blockholder governance and the voting premium. A blockholder and dispersed shareholders first trade in a competitive...
The explosion in ESG research has led to a strong reliance on ESG rating providers. We document widespread changes to the historical ratings of Refinitiv...