Agency costs in small firms

Milo Bianchi () and Henri Luomaranta
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Milo Bianchi: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, TSM - Toulouse School of Management Research - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse
Henri Luomaranta: Auteur indépendant

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Abstract: We explore how the separation between ownership and control affects firm productivity. Using administrative panel data on the universe of limited liability firms 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 spouse's health. Extending the analysis beyond typical samples of large public firms, we show that our effects are stronger in medium-sized private firms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEO's effort at work.

Keywords: CEO ownership; Firm productivity; SME (search for similar items in EconPapers)
Date: 2025-09-18
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