Kiel Working Papers, Kiel Institute for World Economics
Ralph P. Heinrich
Complementarities in Corporate Governance: Ownership Concentration, Capital Structure, Monitoring and Pecuniary Incentives
Abstract: The paper shows that, as owners accumulate larger stakes
and hence become less risk-tolerant, their incentives to monitor management
are attenuated because monitoring shifts some of the firms risk from
management to owners. This counterbalances the positive effect which more
concentrated ownership has on monitoring via reduced free rider problems.
Moreover, the paper shows how the opportunity cost of concentrated
ownership, which is the loss of risk-sharing benefits, creates scope to use
leverage as an additional complementary governance instrument. The paper
offers new explanations for several empirical regularities found in the
Keywords: Corporate governance, Complementarity, Agency problem; (follow links to similar papers)
29 pages, February 2000
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design Joakim Ekebom