Optimal ownership structure and monitoring in entrepreneurial firms

Gino Loyola and Yolanda Portilla

Finance Research Letters, 2020, vol. 33, issue C

Abstract: We model the agency problem existing in an entrepreneurial firm between its founder and an outside investor and characterize the optimal corporate governance design. The analysis describes the relationship between two mechanisms: the level of monitoring exerted by the outside investor (short-run) and the ownership structure designed by the founder (long-run). Our results suggest that the optimal corporate governance design resembles a multiple large shareholders (MLS) structure in which a large investor counterbalances the power of the controlling owner. We derive testable implications regarding the separation between control and cash-flow rights and other firm-specific elements influencing the optimal governance structure.

Keywords: Corporate governance; Multiple large shareholders structure; Agency problem; Monitoring (search for similar items in EconPapers)
JEL-codes: G24 G32 G34 G38 L26 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612318302496
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612318302496

DOI: 10.1016/j.frl.2019.06.005

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().