Working Paper: CEPR ID: DP1806
Authors: Luigi Zingales
Abstract: This paper summarizes my own personal view of what corporate governance is about. I argue that it makes sense to discuss corporate governance only in an incomplete contract world. In this world, the notion of corporate governance is intrinsically related to the definition of the firm. In this respect, the shortcomings of the existing definitions of the firm are reviewed and the possible applications of the idea that the firm is a ?nexus of specific investments? introduced by Rajan and Zingales (1997a and 1997b). The paper concludes by discussing the limitations of the incomplete contracts approach to corporate governance.
Keywords: corporate governance
JEL Codes: G3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| corporate governance (G38) | definition of a firm (D21) |
| governance system (G38) | ex post bargaining over quasirents (D86) |
| governance systems (P41) | efficiency effects ex ante (D61) |
| governance systems (P41) | bargaining conditions ex post (C78) |
| quasirents distribution (D39) | quasirents generation (R33) |
| control of the firm (L21) | protection of investments in bargaining (J52) |
| allocation of control rights (G34) | incentives for specific investments (H54) |
| allocation of control rights (G34) | inefficiencies in bargaining (D61) |