Market Distortions and Corporate Governance

42 Pages Posted: 5 May 2005  

David Kelsey

University of Exeter Business School - Department of Economics

Frank Milne

Queen's University - Department of Economics

Date Written: February 2005

Abstract

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

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

David Kelsey (Contact Author)

University of Exeter Business School - Department of Economics ( email )

Streatham Court
Exeter, Devon EX4 4PU
United Kingdom
013 9226 2536 (Phone)

HOME PAGE: http://people.exeter.ac.uk/dk210/

Frank Milne

Queen's University - Department of Economics ( email )

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