The Political Economy of Corporate Control
AbstractIn a democracy, a political majority can influence both the corporategovernance structure and the return to human and financial capital.We argue that when financial wealth is sufficiently diffused, thereis political support for a strong governance role for dispersed equitymarket investors, and low labor rents. When financial wealth is concentrated,a political majority prefers high labor rents and a strongergovernance role for banks or large investors, even at the cost of profits.The intuition is that labor claims are exposed to undiversifiable risk,so voters with low financial stakes prefer investors who choose lowerrisk strategies. The model may explain the ”great reversal” phenomenonin the first half of the 20th century (Rajan and Zingales, 2003).We argue that in several financially developed countries a financiallyweakened middle class became concerned about labor income risk associatedwith free markets and supported a more corporatist financialsystem. We offer suggestive evidence using post WW1 inflationaryshocks as the source of identifying exogenous variation. See also publication in the 'Journal of Political Economy' , 2006, 114(1) 145-175.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-102/2.
Date of creation: 14 Nov 2005
Date of revision:
Contact details of provider:
Web page: http://www.tinbergen.nl
Corporate governance; political economy; bank control; investor protection;
Find related papers by JEL classification:
- G2 - Financial Economics - - Financial Institutions and Services
- G3 - Financial Economics - - Corporate Finance and Governance
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
- NEP-FIN-2006-01-24 (Finance)
- NEP-FMK-2006-01-24 (Financial Markets)
- NEP-POL-2006-01-24 (Positive Political Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kathy S. He & Randall Morck & Bernard Yeung, 2003.
"Corporate Stability and Economic Growth,"
William Davidson Institute Working Papers Series
553, William Davidson Institute at the University of Michigan.
- Bernard Yeung & Kathy S. He & Randall Morck, 2004. "Corporate Stability and Economic Growth," Econometric Society 2004 North American Winter Meetings 84, Econometric Society.
- He, Kathy S. & Morck, Randall & Yeung, Bernard, 2003. "Corporate Stability and Economic Growth," CEI Working Paper Series 2003-12, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Perotti, Enrico C & von Thadden, Ernst-Ludwig, 1998.
"Dominant Investors and Strategic Transparency,"
CEPR Discussion Papers
1948, C.E.P.R. Discussion Papers.
- Perotti, Enrico C. & Von Thadden, Ernst-Ludwig, 2003.
"Strategic Transparency and Informed Trading: Will Capital Market Integration Force Convergence of Corporate Governance?,"
Journal of Financial and Quantitative Analysis,
Cambridge University Press, vol. 38(01), pages 61-86, March.
- Enrico C. PEROTTI & Ernst-Ludwig VON THADDEN, 1998. "Strategic Transparency and Informed Trading: Will Capital Market Integration Force Convergence of Corporate Governance ?," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 9804, Université de Lausanne, Faculté des HEC, DEEP, revised Jul 2002.
- Stijn Claessens & Leora F. Klapper, 2005.
"Bankruptcy around the World: Explanations of Its Relative Use,"
American Law and Economics Review,
Oxford University Press, vol. 7(1), pages 253-283.
- Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the World: Explanations of its Relative Use," CEI Working Paper Series 2002-17, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the world - explanations of its relative use," Policy Research Working Paper Series 2865, The World Bank.
- Colin Mayer, 1998. "Financial Systems and Corporate Governance: A Review of the International Evidence," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(1), pages 144-, March.
- Randall Morck & Masao Nakamura, 2000. "Japanese Corporate Governance and Macroeconomic Problems," Harvard Institute of Economic Research Working Papers 1893, Harvard - Institute of Economic Research.
- Guiso, Luigi & Jappelli, Tullio, 2000.
"Household Portfolios in Italy,"
CEPR Discussion Papers
2549, C.E.P.R. Discussion Papers.
- Perotti, Enrico C & Volpin, Paolo, 2004.
"Lobbying on Entry,"
CEPR Discussion Papers
4519, C.E.P.R. Discussion Papers.
- Raghuram Rajan & Luigi Zingales, 2003. "The Emergence of Strong Property Rights: Speculation from history," NBER Working Papers 9478, National Bureau of Economic Research, Inc.
- Bruno Biais & Enrico Perotti, 2002. "Machiavellian Privatization," American Economic Review, American Economic Association, vol. 92(1), pages 240-258, March.
- Mark J. Roe, 1997. "The Political Roots Of American Corporate Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(4), pages 8-22.
- Demirguc-Kunt, Asli & Levine, Ross, 1999. "Bank-based and market-based financial systems - cross-country comparisons," Policy Research Working Paper Series 2143, The World Bank.
- Enrico C. Perotti & Ernst-Ludwig von Thadden, 2004. "The Political Economy of Dominant Investors," Tinbergen Institute Discussion Papers 04-091/2, Tinbergen Institute.
- Riccardo De Bonis & Massimiliano Stacchini, 2010.
"What Determines the Size of Bank Loans in Industrialized Countries? The Role of Government Debt,"
Mo.Fi.R. Working Papers
39, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
- Riccardo De Bonis & Massimiliano Stacchini, 2009. "What determines the size of bank loans in industrialized countries? The role of government debt," Temi di discussione (Economic working papers) 707, Bank of Italy, Economic Research and International Relations Area.
- Bordo, Michael D. & Rousseau, Peter L., 2006.
"Legal-political factors and the historical evolution of the finance-growth link,"
European Review of Economic History,
Cambridge University Press, vol. 10(03), pages 421-444, December.
- Michael D. Bordo & Peter L. Rousseau, 2006. "Legal-Political Factors and the Historical Evolution of the Finance-Growth Link," Working Papers 107, Oesterreichische Nationalbank (Austrian Central Bank).
- Michael D. Bordo & Peter L. Rousseau, 2006. "Legal-Political Factors and the Historical Evolution of the Finance-Growth Link," NBER Working Papers 12035, National Bureau of Economic Research, Inc.
- Fluck, Zsuzsanna & Mayer, Colin, 2005.
"Race to the Top or Bottom? Corporate Governance, Freedom of Reincorporation and Competition in Law,"
CEPR Discussion Papers
5133, C.E.P.R. Discussion Papers.
- Zsuzsanna Fluck & Colin Mayer, 2005. "Race to the top or bottom? Corporate governance, freedom of reincorporation and competition in law," Annals of Finance, Springer, vol. 1(4), pages 349-378, October.
- Colin Mayer & Zsuzsanna Fluck, 2005. "Race to the top or bottom? Corporate governance, freedom of reincorporation and competition in law," Economics Series Working Papers 2005-FE-07, University of Oxford, Department of Economics.
- Zsuzsanna Fluck & Colin Mayer, 2005. "Race to the top or bottom? Corporate governance, freedom of reincorporation and competition in law," OFRC Working Papers Series 2005fe07, Oxford Financial Research Centre.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antoine Maartens (+31 626 - 160 892)).
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.