The Influence of Industry Characteristics on Corporate Charters and Bylaws

27 Pages Posted: 22 Jul 2014

See all articles by Robert L. Kieschnick

Robert L. Kieschnick

University of Texas at Dallas

Rabih Moussawi

University of Pennsylvania - The Wharton School; Villanova University - Department of Finance

Qian Mao

Kean University - School of Accounting and Finance

Date Written: July 21, 2014

Abstract

The corporate charter is a contract between the firm and the state. Prior literature on contracts suggests three primary motives for contracting: risk shifting, incentive alignment, and transaction cost minimization. We argue that the characteristics of the industry within which a firm operates should influence the design of corporate charters/bylaws because firms within an industry face similar risk shifting, incentive alignment, and transaction cost concerns, and so similar internal control and change in control concerns. Using data on a sample of U.S. corporations, we find evidence that: (1) there is substantial variation in governance provisions across industries; (2) the influence of selected industry characteristics differ across provisions; and (3) charter provisions cluster according to the industry characteristics that influence their incidence, which explains correlations between provisions within industries.

Keywords: corporate charter, bylaws, corporate governance

JEL Classification: K22, L20, G30

Suggested Citation

Kieschnick, Robert L. and Moussawi, Rabih and Moussawi, Rabih and Mao, Qian, The Influence of Industry Characteristics on Corporate Charters and Bylaws (July 21, 2014). Available at SSRN: https://ssrn.com/abstract=2469422 or http://dx.doi.org/10.2139/ssrn.2469422

Robert L. Kieschnick (Contact Author)

University of Texas at Dallas ( email )

800 W. Campbell Rd, SM31
Richardson, TX 75080
United States
972-883-6273 (Phone)

HOME PAGE: http://www.utdallas.edu/~rkiesch/

Rabih Moussawi

Villanova University - Department of Finance ( email )

800 E Lancaster Ave
Bartley Hall, 2051
Villanova, PA 19085
United States

HOME PAGE: http://www.homepage.villanova.edu/rabih.moussawi

University of Pennsylvania - The Wharton School ( email )

United States

HOME PAGE: http://www.rabihmoussawi.com/

Qian Mao

Kean University - School of Accounting and Finance ( email )

Hynes Hall
1000 Morris Ave.
Union, NJ 07083
United States

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