The Political Economy of Corporate Governance

35 Pages Posted: 15 Mar 2000

See all articles by Marco Pagano

Marco Pagano

University of Naples Federico II - Department of Economics and Statistics; Centre for Studies in Economics and Finance (CSEF); Einaudi Institute for Economics and Finance (EIEF); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Paolo F. Volpin

City University London - Faculty of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: October 1999

Abstract

The paper analyzes the political decision that determines the degree of investor protection. We show that, in some circumstances, entrepreneurs and workers agree to trade low investor protection for high employment protection. The feasibility of this "corporatist" agreement depends on the distribution of wealth and on technological factors. Otherwise, a "non-corporatist" outcome will occur, featuring high investor protection and low employment protection. Therefore, our main prediction is that employment and investor protection is negatively correlated across countries. The model also predicts that the frequency of mergers and acquisitions is negatively correlated with employment protection. Both predictions are consistent with OECD evidence.

JEL Classification: G34, K22, K42

Suggested Citation

Pagano, Marco and Volpin, Paolo F., The Political Economy of Corporate Governance (October 1999). AFA 2002 Atlanta Meetings; Univ. of Salerno Working Paper No. 29. Available at SSRN: https://ssrn.com/abstract=209314 or http://dx.doi.org/10.2139/ssrn.209314

Marco Pagano (Contact Author)

University of Naples Federico II - Department of Economics and Statistics ( email )

Via Cintia - Monte S. Angelo
Napoli, 80126
Italy
+39 081 675306 (Phone)
+39 081 7663540 (Fax)

Centre for Studies in Economics and Finance (CSEF) ( email )

Via Cintia
Complesso Monte S. Angelo
Naples, Naples 80126
Italy

Einaudi Institute for Economics and Finance (EIEF)

Via Sallustiana, 62
Rome, 00187
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

Paolo F. Volpin

City University London - Faculty of Finance ( email )

London, EC2Y 8HB
Great Britain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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