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.
Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture...
The E.U. Takeover Directive was passed twenty years ago with the main aim of fostering a single European takeover market. However, subsequent economic,...
In a canonical takeover model we let an informed large shareholder choose between making a bid or initiating a sale to another acquirer. Such takeover...
We study the welfare implications of the rise of common ownership in the United States from 1995 to 2021. We build a general equilibrium model with a...