Market Distortions and Corporate Governance
University of Exeter Business School - Department of Economics
Queen's University - Department of Economics
Queen's Univ. Law & Economics Paper No. 2005-02
This paper studies corporate governance when a firm faces imperfect competition. We derive firms' decisions from utility maximization by individuals. This reduces the usual monopoly distortion. We find that corporate governance can effect the equilibrium in the product (or input) markets. This enables us to endogenize the objective function of the firm. If the firm cannot commit not to change its constitution, we find a Coaselike result where all market power is lost in the limit. We present a more abstract model of governance in the presence of market distortions and discuss its implications for the governance of universities.
Number of Pages in PDF File: 42
Keywords: Corporate governance, stakeholder, take-over, strategic delegation
JEL Classification: D70, L13, L20
Date posted: May 5, 2005
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