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Financial markets industry dynamics and growth

Author

Listed:
  • Maurizio Iacopetta

    (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)

  • Raoul Minetti

    (Michigan State University [East Lansing] - Michigan State University System)

  • Pietro Peretto

    (Duke University [Durham])

Abstract

We study the impact of corporate governance frictions in an economy where growth is driven both by the foundation of new firms and by the in-house investment of incumbent firms. Firms managers engage in tunneling and empire building activities. Active shareholders monitor man- agers, but can shirk on their monitoring, to the detriment of minority (passive) shareholders. The analysis reveals that these conflicts among firms stakeholders inhibit the entry of new firms, thereby increasing market concentration. Despite depressing investment returns in the short run, the frictions can however lead incumbents to invest more aggressively in the long run to exploit the concentrated market structure. By means of quantitative analysis, we characterize conditions under which corporate governance reforms boost or reduce welfare.

Suggested Citation

  • Maurizio Iacopetta & Raoul Minetti & Pietro Peretto, 2014. "Financial markets industry dynamics and growth," Working Papers hal-03429924, HAL.
    • Handle: RePEc:hal:wpaper:hal-03429924
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    Citations

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    Cited by:

    1. Tabata, Ken, 2024. "Redistributive policy and R&D-based growth," Journal of Macroeconomics, Elsevier, vol. 79(C).
    2. Chu, Angus C. & Fan, Haichao & Wang, Xilin, 2020. "Status-seeking culture and development of capitalism," Journal of Economic Behavior & Organization, Elsevier, vol. 180(C), pages 275-290.
    3. Chu, Angus C. & Peretto, Pietro F., 2023. "Innovation and inequality from stagnation to growth," European Economic Review, Elsevier, vol. 160(C).
    4. Chu, Angus C. & Kou, Zonglai & Wang, Xilin, 2020. "Dynamic effects of minimum wage on growth and innovation in a Schumpeterian economy," Economics Letters, Elsevier, vol. 188(C).
    5. Zakaria Babutsidze & Maurizio Iacopetta, 2016. "Innovation, growth and financial markets," Journal of Evolutionary Economics, Springer, vol. 26(1), pages 1-24, March.
    6. Chu, Angus C. & Peretto, Pietro & Xu, Rongxin, 2023. "Export-led takeoff in a Schumpeterian economy," Journal of International Economics, Elsevier, vol. 145(C).
    7. repec:spo:wpmain:info:hdl:2441/2c47q6gpge8vrbqjak551kmu6c is not listed on IDEAS
    8. Maurizio Iacopetta & Raoul Minetti & Pierluigi Murro, 2020. "Growing Through Spinoffs," Sciences Po Economics Publications (main) hal-03389197, HAL.
    9. Zhou, Yuwen & Tian, Lixin & Yang, Xiaoguang & Wan, Bingyue, 2024. "Robust green Schumpeterian endogenous growth model and spatial Kuznets curve," Energy Economics, Elsevier, vol. 133(C).
    10. Zhou, Yuwen & Tian, Lixin & Yang, Xiaoguang, 2023. "Schumpeterian endogenous growth model under green innovation and its enculturation effect," Energy Economics, Elsevier, vol. 127(PB).
    11. Wang, Di & Wang, Xilin, 2025. "Unions, Growth and Inequality in a Schumpeterian Economy," MPRA Paper 123942, University Library of Munich, Germany.
    12. Angus C. Chu & Yuichi Furukawa & Sushanta Mallick & Pietro Peretto & Xilin Wang, 2021. "Dynamic effects of patent policy on innovation and inequality in a Schumpeterian economy," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(4), pages 1429-1465, June.
    13. Iacopetta, Maurizio & Minetti, Raoul & Murro, Pierluigi, 2024. "Growing through spinoffs. Corporate governance, entry dynamics, and innovation," Journal of Economic Dynamics and Control, Elsevier, vol. 161(C).
    14. He, Qichun & Wang, Xilin, 2024. "Endogenous human capital and market structure in a monetary Schumpeterian model," Economic Modelling, Elsevier, vol. 141(C).
    15. Lu Han, 2019. "The Mutable Geography of Firms' International Trade: Evidence and Macroeconomic Implications," Working Papers 201909, University of Liverpool, Department of Economics.
    16. Chu, Angus C. & Peretto, Pietro F. & Wang, Xilin, 2022. "Agricultural revolution and industrialization," Journal of Development Economics, Elsevier, vol. 158(C).
    17. Maurizio Iacopetta & Raoul Minetti & Pierluigi Murro, 2020. "Growing through Spinoffs. Corporate Governance, Entry, and Innovation," Working Papers CASMEF 2002, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    18. Iacopetta, Maurizio & Peretto, Pietro F., 2024. "Business taxes, management delegation, and growth," European Economic Review, Elsevier, vol. 170(C).
    19. Chu, Angus C. & Furukawa, Yuichi & Wang, Xilin, 2022. "Rent-seeking government and endogenous takeoff in a Schumpeterian economy," Journal of Macroeconomics, Elsevier, vol. 72(C).
    20. Iacopetta, Maurizio & Peretto, Pietro F., 2021. "Corporate governance and industrialization," European Economic Review, Elsevier, vol. 135(C).
    21. He, Qichun & Wang, Xilin, 2020. "Money, Human Capital and Endogenous Market Structure in a Schumpeterian Economy," MPRA Paper 104609, University Library of Munich, Germany.
    22. Chu, Angus C. & Furukawa, Yuichi & Peretto, Pietro & Xu, Rongxin, 2024. "Agricultural trade and industrial development," MPRA Paper 122630, University Library of Munich, Germany.

    More about this item

    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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