Agency Costs in Small Firms

Milo Bianchi and Henri Luomaranta

No 21-1252, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We explore how the separation between ownership and control a§ects Örm productivity. Using administrative panel data on the universe of limited liability Örms in Finland, we document a substantial increase in productivity when the CEO obtains majority ownership or when the majority owner becomes the CEO. We exploit plausibly exogenous variations to CEO turnover, induced by shocks to the CEO spouseís health. Extending the analysis beyond typical samples of large public Örms, we show that our e§ects are stronger in medium-sized private Örms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEOís e§ort at work.

Keywords: agency costs; Örm productivity,; CEO ownership. (search for similar items in EconPapers)
JEL-codes: D24 E23 G30 L25 M12 (search for similar items in EconPapers)
Date: 2021-08
New Economics Papers: this item is included in nep-bec, nep-cwa, nep-eur, nep-hrm, nep-ind, nep-isf and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:125982

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