Arbeitspapier

The Political Economy of Corporate Control

In a democracy, a political majority can influence both the corporategovernance structure and the return to human and financial capital.We argue that when financial wealth is sufficiently diffused, thereis political support for a strong governance role for dispersed equitymarket investors, and low labor rents. When financial wealth is concentrated,a political majority prefers high labor rents and a strongergovernance role for banks or large investors, even at the cost of profits.The intuition is that labor claims are exposed to undiversifiable risk,so voters with low financial stakes prefer investors who choose lowerrisk strategies. The model may explain the ”great reversal” phenomenonin the first half of the 20th century (Rajan and Zingales, 2003).We argue that in several financially developed countries a financiallyweakened middle class became concerned about labor income risk associatedwith free markets and supported a more corporatist financialsystem. We offer suggestive evidence using post WW1 inflationaryshocks as the source of identifying exogenous variation.

Sprache
Englisch

Erschienen in
Series: Tinbergen Institute Discussion Paper ; No. 05-102/2

Klassifikation
Wirtschaft
Capitalist Systems: Political Economy
Thema
Corporate governance
political economy
bank control
investor protection

Ereignis
Geistige Schöpfung
(wer)
Perotti, Enrico
von Thadden, Ernst-Ludwig
Ereignis
Veröffentlichung
(wer)
Tinbergen Institute
(wo)
Amsterdam and Rotterdam
(wann)
2005

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Perotti, Enrico
  • von Thadden, Ernst-Ludwig
  • Tinbergen Institute

Entstanden

  • 2005

Ähnliche Objekte (12)