The Separation of Firm Ownership and Management: A Reputational Perspective

50 Pages Posted: 31 Oct 2013 Last revised: 11 Mar 2015

See all articles by Thomas H. Noe

Thomas H. Noe

University of Oxford - Said Business School; University of Oxford - Balliol College; Bank of Finland; European Corporate Governance Institute

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management

Thomas Rietz

University of Iowa - Henry B. Tippie College of Business

Date Written: March 2015

Abstract

We examine the effect of ownership and governance structures on what is arguably a firm’s most valuable asset: its reputation. We model reputations based on alterable organizational and structural firm characteristics rather than the personal characteristics of the management team. We show that, in some cases, delegated “professional” management combined with outside shareholder governance supports reputable firm behavior even when owner management cannot. The option to reform after a reputation is damaged further increases the advantage of delegated management because the reform option reduces the ability of owner managers to commit ex ante to reputable behavior.

Keywords: adverse selection, reputation

JEL Classification: C91, D82, G31, G32, L15

Suggested Citation

Noe, Thomas H. and Rebello, Michael J. and Rietz, Thomas A., The Separation of Firm Ownership and Management: A Reputational Perspective (March 2015). Available at SSRN: https://ssrn.com/abstract=2347159 or http://dx.doi.org/10.2139/ssrn.2347159

Thomas H. Noe

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 3BJ
United Kingdom

University of Oxford - Balliol College ( email )

Broad St
Oxford, OX1 3BJ
United Kingdom

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

European Corporate Governance Institute ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Michael J. Rebello

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Thomas A. Rietz (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

C108 PBB, Suite S244
Iowa City, IA 52242-1994
United States
319-335-0856 (Phone)
319-335-3690 (Fax)

HOME PAGE: http://tippie.uiowa.edu/people/profile/profile.aspx?id=195021

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