Financial, markets, industry dynamics and growth

Maurizio Iacopetta (), Raoul Minetti and Pietro Peretto

No 2014-22, Documents de Travail de l'OFCE from Observatoire Francais des Conjonctures Economiques (OFCE)

Abstract: We study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new firms and by the in-house investment of incumbent firms. Firms' managers engage in tunneling and empire building activities. Active shareholders monitor man- agers, but can shirk on their monitoring, to the detriment of minority (passive) shareholders. The analysis reveals that these confiicts among firms' stakeholders inhibit the entry of new firms, thereby increasing market concentration. Despite depressing investment returns in the short run, the frictions can however lead incumbents to invest more aggressively in the long run to exploit the concentrated market structure. By means of quantitative analysis, we characterize conditions under which corporate governance reforms boost or reduce welfare.

Keywords: Endogenous Growth; Market Structure; Financial Frictions; Corporate Gover- nance.; Endogenous growth; Market Structure; Financial Frictions; Corporate Governance (search for similar items in EconPapers)
JEL-codes: E44 G30 O40 (search for similar items in EconPapers)
Date: 2014-12
New Economics Papers: this item is included in nep-cfn and nep-mac
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Related works:
Journal Article: Financial Markets, Industry Dynamics and Growth (2019)
Working Paper: Financial Markets, Industry Dynamics and Growth (2019)
Working Paper: Financial Markets, Industry Dynamics and Growth (2019)
Working Paper: Financial Markets, Industry Dynamics, and Growth (2015)
Working Paper: Financial markets industry dynamics and growth (2014)
Working Paper: Financial markets industry dynamics and growth (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:fce:doctra:1422

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