Kiel Working Papers, Kiel Institute for World Economics
No 931:
A Model of Corporate Governance as a System
Ralph P. Heinrich
Abstract: This paper provides a rationale for the coexistence of
different systems of corporate governance based on the multitude of agency
problems typically to be governed within a given firm. Because there are
complementarity and substitution relationships between governance
instruments, specific combinations of instruments which reinforce each
other in minimizing agency costs fit together better than alternative
combinations. We derive comparative static results showing how various
governance instruments can be combined to form a coherent system of
corporate governance and how changes in exogenous parameters can lead to
simultaneous, systemic changes in the instruments used.
Keywords: Corporate governance, Complementarity, Agency problem; (follow links to similar papers)
JEL-Codes: G300; D230; (follow links to similar papers)
31 pages, June 1999
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