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Financial markets industry dynamics and growth

Abstract : We study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new …rms and by the in-house investment of incumbent …rms. Firms’ managers engage in tunneling and empire building activities. Active shareholders monitor man- agers, but can shirk on their monitoring, to the detriment of minority (passive) shareholders. The analysis reveals that these con‡icts among …rms’ stakeholders inhibit the entry of new …rms, thereby increasing market concentration. Despite depressing investment returns in the short run, the frictions can however lead incumbents to invest more aggressively in the long run to exploit the concentrated market structure. By means of quantitative analysis, we characterize conditions under which corporate governance reforms boost or reduce welfare.
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Preprints, Working Papers, ...
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https://hal-sciencespo.archives-ouvertes.fr/hal-03429924
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Submitted on : Tuesday, November 16, 2021 - 4:28:14 AM
Last modification on : Friday, December 3, 2021 - 10:51:29 AM

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Maurizio Iacopetta, Raoul Minetti, Pietro Peretto. Financial markets industry dynamics and growth. 2014. ⟨hal-03429924⟩

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