The Internal Governance of Firms

Viral Acharya, Stewart C. Myers and Raghuram Rajan

No 15568, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. Internal governance can mitigate agency problems and ensure that firms have substantial value, even with little or no external governance by investors. External governance, even if crude and uninformed, can complement internal governance and improve efficiency. This leads to a theory of investment and dividend policy, where dividends are paid by self-interested CEOs to maintain a balance between internal and external control.

JEL-codes: G31 G34 G35 (search for similar items in EconPapers)
Date: 2009-12
New Economics Papers: this item is included in nep-bec
Note: CF
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Published as Viral V. Acharya & Stewart C. Myers & Raghuram G. Rajan, 2011. "The Internal Governance of Firms," Journal of Finance, American Finance Association, vol. 66(3), pages 689-720, 06.

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Related works:
Journal Article: The Internal Governance of Firms (2011)
Working Paper: The Internal Governance of Firms (2009)
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