Agency Costs and Firm Productivity

35 Pages Posted: 15 Nov 2019

See all articles by Milo Bianchi

Milo Bianchi

University of Toulouse 1 - Toulouse School of Economics (TSE)

Henri Luomaranta

Government of the Republic of Finland - Statistics Finland

Date Written: November 6, 2019

Abstract

We explore how the separation between ownership and control affects firm productivity. Using Finnish administrative data on the universe of limited liability firms, we document a substantial increase in firm productivity when the CEO obtains majority ownership or when the majority owner becomes the CEO. We exploit plausibly exogenous variations to ownership and control, induced for example by shocks to the CEO spouse's health. Extending the analysis beyond typical samples of large public firms, we show that our effects are stronger in medium-sized private firms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEO's effort at work.

Keywords: agency costs, firm productivity, CEO ownership

JEL Classification: G30, M12, D24, E23, L25

Suggested Citation

Bianchi, Milo and Luomaranta, Henri, Agency Costs and Firm Productivity (November 6, 2019). Available at SSRN: https://ssrn.com/abstract=3482333 or http://dx.doi.org/10.2139/ssrn.3482333

Milo Bianchi (Contact Author)

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Henri Luomaranta

Government of the Republic of Finland - Statistics Finland ( email )

Finland

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
162
PlumX Metrics