The Allocation and Monitoring Role of Capital Markets: Theory and International Evidence
AbstractCapital markets perform two distinct functions: provision of capital and facilitation of good governance through information production and monitoring. I argue that the governance function has more impact on the efficiency with which resources are utilized within the firm. Based on industry level data across thirty-eight countries, I present evidence suggesting a positive relation between market-based governance and improvements in industry efficiency. The measures of governance are also positively correlated with productivity improvements and growth in real output. Furthermore, while governance affects efficiency, the capital provision services induce technological change. The evidence underscores the role of capital markets as a conduit of socially valuable governance services as distinct from capital provision
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Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp881.
Date of creation: 01 Mar 2003
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Corporate Governance; Information Aggregation; Monitoring; Economic Efficiency; Productivity; Economic Growth;
Other versions of this item:
- Tadesse, Solomon, 2004. "The Allocation and Monitoring Role of Capital Markets: Theory and International Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(04), pages 701-730, December.
- G3 - Financial Economics - - Corporate Finance and Governance
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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- Calcagno, Riccardo & Heider, Florian, 2007. "Market based compensation, price informativeness and short-term trading," Working Paper Series 0735, European Central Bank.
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