Corporate Governance and the Financing of Investment for Structural Change

Martin Hellwig

No 00-32, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: The paper puts forward the proposition that large corporations should be treated as financial institutions in their own right, as they use available earning from some activities to finance others, including new developments. With this view, it is suggested that the role of the financial system may be seen as channelling funds from activities earning cash to activities needing cash (rather than channelling fund from households to firms). Starting from a critical assessment of the literature on agency costs of internal finance, the paper discusses the pros and cons of having new activities financed within given corporate shells, with significant management autonomy; this is compared to a system where earnings are distributed and - at least partly - reinvested through organized markets. The political economy of decision making within existing corporate shells is identified as a major source of bias in decisions.

Pages: 25 pages
Date: 2000-07-10
New Economics Papers: this item is included in nep-acc, nep-cfn, nep-fin and nep-pke
Note: I am grateful for helpful comments from Colin Mayer and Georg Rich as well as research support from the Deutsche Forschungsgemeinschaft through Sonderforschungsbereich 504.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sfb504.uni-mannheim.de/publications/dp00-32.pdf (application/pdf)

Related works:
Working Paper: Corporate governance and the financing of investment for structural change (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:xrs:sfbmaa:00-32

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim Contact information at EDIRC., Sonderforschungsbereich 504, University of Mannheim
Bibliographic data for series maintained by Carsten Schmidt ( this e-mail address is bad, please contact ).