Query:
faculty: "FEB" and publication year: "2003"
| Authors | E.C. Perotti, E.-L. von Thadden | | Title | The political economy of bank and equity dominance |
| Publisher | Centre for Economic Policy Research |
| Place | London |
| Year | 2003 |
| Title series | CEPR discussion paper |
| Series number | 3914 |
| Faculty | Faculty of Economics and Business |
| Institute/dept. | FEB: Amsterdam Business School Research Institute (ABS-RI) |
| Keywords | bank centred system; corporate governance; corporate investment; median voter; political economy and social insurance |
| Classification | JEL Classification: G28, G31, G32 and G34 |
| Abstract | Legislation affects corporate governance and the return to human and financial capital. We allow the preference of a political majority to determine both the governance structure and the extent of labour rents. In a society where median voters have relatively more at stake in the form of human capital rather than financial wealth, they prefer a less risky environment even when this reduces profits, as labour rents are exposed to undiversifiable firm-specific risk. In general, labour and lenders prefer less corporate risk, since their claims are a concave function of firm profitability. This congruence of interests can lead the political majority to support bank over equity dominance. As share-holdings by the median voters increase, the dominance structure will move towards favouring equity markets with riskier corporate strategies and higher profits. |
| Document type | Report |
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