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Corporate Governance, Finance, and the Real Sector

Author

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  • Fulghieri, Paolo
  • Suominen, Matti

Abstract

We present a theory of the linkages between corporate governance, corporate finance, and the real sector of an economy. Using a structural model of industry equilibrium with endogenous entry, we show that poor corporate governance leads to low levels of competition, and to firms with high insider ownership and leverage. In contrast, good corporate governance promotes the adoption of more efficient technologies and development of sectors more exposed to moral hazard. We use our model to study equity market liberalization, and we show that liberalizations facilitate entry and adoption of more productive technologies, especially in countries with good corporate governance.

Suggested Citation

  • Fulghieri, Paolo & Suominen, Matti, 2012. "Corporate Governance, Finance, and the Real Sector," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(6), pages 1187-1214, December.
    • Handle: RePEc:cup:jfinqa:v:47:y:2012:i:06:p:1187-1214_00
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    1. repec:spo:wpmain:info:hdl:2441/258fqttgag854r8bkhc16pmoo5 is not listed on IDEAS
    2. Maurizio Iacopetta & Raoul Minetti & Pietro F Peretto, 2019. "Financial Markets, Industry Dynamics and Growth," The Economic Journal, Royal Economic Society, vol. 129(621), pages 2192-2215.
    3. Zakaria Babutsidze & Maurizio Iacopetta, 2016. "Innovation, growth and financial markets," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 1-24, March.
    4. Iacopetta, Maurizio & Peretto, Pietro F., 2021. "Corporate governance and industrialization," European Economic Review, Elsevier, vol. 135(C).
    5. Maurizio Iacopetta & Raoul Minetti & Pietro F Peretto, 2019. "Financial Markets, Industry Dynamics and Growth," Economic Journal, Royal Economic Society, vol. 129(621), pages 2192-2215.
    6. Popoyan, Lilit & Napoletano, Mauro & Roventini, Andrea, 2020. "Winter is possibly not coming: Mitigating financial instability in an agent-based model with interbank market," Journal of Economic Dynamics and Control, Elsevier, vol. 117(C).
    7. repec:hal:spmain:info:hdl:2441/7nn6fpcnia859pog8o084b54ct is not listed on IDEAS
    8. repec:hal:spmain:info:hdl:2441/258fqttgag854r8bkhc16pmoo5 is not listed on IDEAS
    9. repec:spo:wpmain:info:hdl:2441/7nn6fpcnia859pog8o084b54ct is not listed on IDEAS
    10. repec:hal:spmain:info:hdl:2441/1ani1qs24g9in97gbhnanm575u is not listed on IDEAS

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