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Corporate Governance, Finance, and the Real Sector

Author

Listed:
  • 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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    Citations

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    Cited by:

    1. 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.
    2. 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).
    3. repec:hal:spmain:info:hdl:2441/258fqttgag854r8bkhc16pmoo5 is not listed on IDEAS
    4. Zakaria Babutsidze & Maurizio Iacopetta, 2016. "Innovation, growth and financial markets," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 1-24, March.
    5. repec:hal:spmain:info:hdl:2441/7nn6fpcnia859pog8o084b54ct is not listed on IDEAS
    6. repec:hal:spmain:info:hdl:2441/5gcvpatejr92bbog69gpen3cmn is not listed on IDEAS
    7. repec:hal:spmain:info:hdl:2441/1j4v8sl4fc9a49ankmnhv6bb6a is not listed on IDEAS
    8. Iacopetta, Maurizio & Peretto, Pietro F., 2021. "Corporate governance and industrialization," European Economic Review, Elsevier, vol. 135(C).
    9. 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.
    10. repec:hal:spmain:info:hdl:2441/1ani1qs24g9in97gbhnanm575u is not listed on IDEAS

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