42 Pages Posted: 5 May 2005
Date Written: February 2005
This paper studies corporate governance when a firm faces imperfect competition. We derive firms' decisions from utility maximization by individuals. This reduces the usual monopoly distortion. We find that corporate governance can effect the equilibrium in the product (or input) markets. This enables us to endogenize the objective function of the firm. If the firm cannot commit not to change its constitution, we find a Coaselike result where all market power is lost in the limit. We present a more abstract model of governance in the presence of market distortions and discuss its implications for the governance of universities.
Keywords: Corporate governance, stakeholder, take-over, strategic delegation
JEL Classification: D70, L13, L20
Suggested Citation: Suggested Citation
Kelsey, David and Milne, Frank, Market Distortions and Corporate Governance (February 2005). Queen's Univ. Law & Economics Paper No. 2005-02. Available at SSRN: https://ssrn.com/abstract=704821 or http://dx.doi.org/10.2139/ssrn.704821