Financial Markets, Industry Dynamics and Growth

Maurizio Iacopetta (), Raoul Minetti and Pietro Peretto

The Economic Journal, 2019, vol. 129, issue 621, 2192-2215

Abstract: This article introduces corporate governance frictions into a growth model with endogenous market structure. Managers engage in corporate resource diversion and empire building. Shareholders discipline managers with incentive compensation contracts. A reform that mitigates corporate governance frictions boosts firms’ entry and, for a given market structure, has an ambiguous impact on incumbents’ return to product improvement. However, as the market structure adjusts, becoming more diffuse, incumbents invest less in product improvement. Calibrating the model to U.S. data, we find that a reform of the kind recently enacted in several advanced economies can lead to a welfare loss.

Date: 2019
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Citations: View citations in EconPapers (31)

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Related works:
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)
Working Paper: Financial markets industry dynamics and growth (2014)
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