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Information externalities in corporate governance

Author

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  • Raff, Konrad

Abstract

The model formalizes the idea that active monitoring by shareholders generates positive externalities for peer firms. Shareholders gather information to disentangle different performance factors and subsequently intervene with firm management. A cross-firm information externality arises because an intervention transmits private information about common industry conditions to peer firms. The externality has various implications: shareholders may benefit from closer monitoring at peer firms and mimic peer interventions. Monitoring choices are strategic substitutes. Externalities can provide a rationale for common ownership of informationally related firms.

Suggested Citation

  • Raff, Konrad, 2026. "Information externalities in corporate governance," Economics Letters, Elsevier, vol. 259(C).
    • Handle: RePEc:eee:ecolet:v:259:y:2026:i:c:s0165176525006433
    DOI: 10.1016/j.econlet.2025.112806
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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