Corporate Governance and Competition

Franklin Allen and Douglas Gale ()

Center for Financial Institutions Working Papers from Wharton School Center for Financial Institutions, University of Pennsylvania

Abstract: The corporate governance systems operating in different countries are distinct. In the U.S. and U.K., it is often argued that the threat of takeover ensures managers act in the shareholders' interests. In countries such as Germany, Japan, and France, it is suggested banks and other institutions act as monitors. There is some evidence that neither system is particularly effective. We argue that competition among firms may be more effective than either of these mechanisms in ensuring that resources are used efficiently.

Date: 1999-07
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