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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/25996
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| Title: | DESIGN OF CORPORATE GOVERNANCE: Role of Ownership Structure, Takeovers,
and Bank Debt |
| Authors: | John, Kose
Kedia, Simi |
| Issue Date: | Dec-2006 |
| Series/Report no.: | CLB-06-023 |
| Abstract: | We examine how different economies would design an optimal corporate
governance system structured from three of the main mechanisms of
corporate governance (managerial ownership, monitoring by banks, and
disciplining by the takeover market). We allow for interactions among
the mechanisms. The first set of results characterizes the combination
of governance mechanisms that can appear in any optimally designed
structure: 1) when monitored debt appears in an optimal system it is
accompanied by concentrated ownership, and 2) when takeovers appear in
an optimal system they are accompanied by diffuse ownership. We show
that out of the numerous governance structures that could arise from
combinations of the governance mechanisms, only three are candidates for
an optimal system. These three endogenously derived governance
structures match the prevalent systems (family based, bank based and
market based) in the world. The optimal system for a given economy is
characterized as a function of the degrees of development of its
financial institutions and markets. Our analysis yields several testable implications. |
| URI: | http://hdl.handle.net/2451/25996 |
| Appears in Collections: | NYU Pollack Center for Law & Business Working Papers
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