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

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

Joyce Wang

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 Wang, Joyce, 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

Joyce Wang

Kean University - School of Accounting and Finance ( email )

Willis Hall 206-G
1000 Morris Ave.
Union, NJ 07083
United States

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