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Corporate governance structure and product market competition

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  • Frederick Dongchuhl Oh
  • Kyung Suh Park

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.

Suggested Citation

  • Frederick Dongchuhl Oh & Kyung Suh Park, 2016. "Corporate governance structure and product market competition," Applied Economics, Taylor & Francis Journals, vol. 48(14), pages 1281-1292, March.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:14:p:1281-1292
    DOI: 10.1080/00036846.2015.1096009
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    Cited by:

    1. Oh, Frederick Dongchuhl & Shin, Sean Seunghun, 2020. "Does product market competition affect corporate governance? Evidence from corporate takeovers," Journal of Empirical Finance, Elsevier, vol. 59(C), pages 68-87.
    2. Le Pape, Nicolas & Wang, Yongying, 2020. "Can product differentiation mitigate conflicts of interest between principal stakeholders? A cournot-bertrand comparison," Economic Modelling, Elsevier, vol. 91(C), pages 341-346.
    3. Sara De Masi & Kose John & Agnieszka Słomka-Gołębiowska & Piotr Urbanek, 2023. "Regulation and post-crisis pay disclosure strategies of banks," Review of Quantitative Finance and Accounting, Springer, vol. 61(4), pages 1243-1275, November.
    4. Lee, Kyounghun & Oh, Frederick Dongchuhl, 2022. "Mandatory disclosure, investment, and private benefits of control," Economics Letters, Elsevier, vol. 216(C).
    5. Chen Chun-Hung & Chen Kuan-Wei & Chen Yu-Fan & Lin Chia-Yin, 2024. "The New Form Agency Problem: Cooperation and Circular Agency," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 24(1), pages 97-116, January.
    6. Hyun Duk Lee & Frederick Dongchuhl Oh & Junghum Park, 2022. "The impact of mandatory K‐IFRS adoption on IPO underpricing," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 1101-1119, January.
    7. Huang, Jiexiang & Roberts, Helen & Tan, Eric K.M., 2024. "Media uncertainty and risk-taking," International Review of Financial Analysis, Elsevier, vol. 91(C).

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