IDEAS home Printed from https://ideas.repec.org/p/ysm/wpaper/ysm270.html
   My bibliography  Save this paper

What Makes Autonomous Management Do Well?: Corporate Governance without External Controls

Author

Listed:
  • Shin'ichi Hirota
  • Kohei Kawamura

Abstract

We propose a model of the widely held firm where management may behave on behalf of shareholders even without external controls. The model shows that there exists a corporate governance mechanism inside the firm where workers are employed on a long-term basis. When effort of young workers depends on managerial decision-making, they give implicit pressure on the managers, which may substitute control by shareholders. If this mechanism works fairly well, it is optimal for shareholders to leave the firm autonomous. We also discuss how the firm's internal factors (such as retention rate and business information sharing) and external environments (such as product market competition and labor market rigidity) affect the efficacy of this internal governance mechanism.

Suggested Citation

  • Shin'ichi Hirota & Kohei Kawamura, 2002. "What Makes Autonomous Management Do Well?: Corporate Governance without External Controls," Yale School of Management Working Papers ysm270, Yale School of Management, revised 01 Sep 2002.
    • Handle: RePEc:ysm:wpaper:ysm270
    as

    Download full text from publisher

    File URL: https://repec.som.yale.edu/icfpub/publications/2624.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Luigi Zingales, 2000. "In Search of New Foundations," Journal of Finance, American Finance Association, vol. 55(4), pages 1623-1653, August.
    2. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 191-213.
    3. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 724-746, August.
    4. Mike Burkart & Denis Gromb & Fausto Panunzi, 1997. "Large Shareholders, Monitoring, and the Value of the Firm," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 693-728.
    5. Dore, Ronald & Lazonick, William & O'Sullivan, Mary, 1999. "Varieties of Capitalism in the Twentieth Century," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 15(4), pages 102-120, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    2. Baghdasaryan, Delia & la Cour, Lisbeth, 2013. "Competition, ownership and productivity. A panel analysis of Czech firms," Journal of Economics and Business, Elsevier, vol. 69(C), pages 86-100.
    3. Shin'ichi Hirota & Kohei Kawamura, 2002. "What Makes Autonomous Management Do Well?: Corporate Governance without External Controls," Yale School of Management Working Papers ysm270, Yale School of Management, revised 01 Sep 2002.
    4. Maican, Florin G., 2012. "From Boom to Bust and Back Again: A dynamic analysis of IT services," Working Papers in Economics 543, University of Gothenburg, Department of Economics.
    5. François-Charles Wolff & Dale Squires & Patrice Guillotreau, 2013. "The Firm's Management in Production: Management, Firm, and Time Effects in an Indian Ocean Tuna Fishery," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(3), pages 547-567.
    6. Masahito Ambashi, 2017. "Competition Effects and Industrial Productivity: Lessons from Japanese Industry," Asian Economic Papers, MIT Press, vol. 16(3), pages 212-249, Fall.
    7. Kirstein, Roland & Kirstein, Annette, 2004. "Inefficient Intra-Firm Incentives Can Stabilize Cartels in Cournot Oligopolies," CSLE Discussion Paper Series 2004-09, Saarland University, CSLE - Center for the Study of Law and Economics.
    8. Waisman, Maya, 2013. "Product market competition and the cost of bank loans: Evidence from state antitakeover laws," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4721-4737.
    9. Xavier Giroud & Holger M. Mueller, 2009. "Does Corporate Governance Matter in Competitive Industries?," NBER Working Papers 14877, National Bureau of Economic Research, Inc.
    10. Florin Maican & Matilda Orth, 2017. "Productivity Dynamics and the Role of ‘Big-Box’ Entrants in Retailing," Journal of Industrial Economics, Wiley Blackwell, vol. 65(2), pages 397-438, June.
    11. Ramiro de Elejalde & Carlos Ponce & Flavia Roldán, 2018. "Innovation and competition: evidence from Uruguayan firms," Documentos de Investigación 116, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    12. Karuna, Christo, 2007. "Industry product market competition and managerial incentives," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 275-297, July.
    13. Stefan Beiner & Markus M. Schmid & Gabrielle Wanzenried, 2011. "Product Market Competition, Managerial Incentives and Firm Valuation," European Financial Management, European Financial Management Association, vol. 17(2), pages 331-366, March.
    14. Vicente Cuñat & Maria Guadalupe, 2009. "Globalization and the Provision of Incentives inside the Firm: The Effect of Foreign Competition," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 179-212, April.
    15. Ugur, Mehmet & Solomon, Edna & Zeynalov, Ayaz, 2022. "Leverage, competition and financial distress hazard: Implications for capital structure in the presence of agency costs," Economic Modelling, Elsevier, vol. 108(C).
    16. Yuk Ying Chang & Martin Young, 2015. "Dissipative Competition: Evidence from a Quasi-Natural Experiment," International Review of Finance, International Review of Finance Ltd., vol. 15(2), pages 169-198, June.
    17. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
    18. Vidhi Chhaochharia & Yaniv Grinstein & Gustavo Grullon & Roni Michaely, 2017. "Product Market Competition and Internal Governance: Evidence from the Sarbanes–Oxley Act," Management Science, INFORMS, vol. 63(5), pages 1405-1424, May.
    19. L??szl?? Halpern & G??bor K??r??si, 2003. "Corporate performance and market structure during transition in Hungary," William Davidson Institute Working Papers Series 2003-606, William Davidson Institute at the University of Michigan.
    20. Becker, Bo & Cronqvist, Henrik & Fahlenbrach, Rüdiger, 2011. "Estimating the Effects of Large Shareholders Using a Geographic Instrument," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(4), pages 907-942, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ysm:wpaper:ysm270. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/smyalus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.