Corporate governance structure and product market competition |
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Authors: | Frederick Dongchuhl Oh Kyung Suh Park |
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Affiliation: | 1. KAIST College of Business, Korea Advanced Institute of Science and Technology, Seoul, Korea;2. Korea University Business School, Korea University, Seoul, Korea |
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Abstract: | This article assesses the effects of the competitive structure of a product market on a firm’s corporate governance structure. Our model demonstrates that shareholders strategically determine the corporate governance structure, including the manager’s stock ownership and his controlling power over the firm, in order to maximize their utility in the product market competition. We find that the manager’s stock ownership is lower and his controlling power over the firm is higher when the firm’s product is more profitable or when competition within the product market is more severe. The inefficiency of the wealth transfer from shareholders to the manager also affects the corporate governance structure. |
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Keywords: | Corporate governance structure managerial ownership private benefit of control product market competition |
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