Optimal ownership structure and monitoring in entrepreneurial firms

Gino Loyola, Yolanda Portilla

Resultado de la investigación: Article

Resumen

We model the agency problem existing in an entrepreneurial firm between its founder and an outside investor and characterize the optimal corporate governance design. The analysis describes the relationship between two mechanisms: the level of monitoring exerted by the outside investor (short-run) and the ownership structure designed by the founder (long-run). Our results suggest that the optimal corporate governance design resembles a multiple large shareholders (MLS) structure in which a large investor counterbalances the power of the controlling owner. We derive testable implications regarding the separation between control and cash-flow rights and other firm-specific elements influencing the optimal governance structure.

Idioma originalEnglish
PublicaciónFinance Research Letters
DOI
EstadoAccepted/In press - 1 ene 2019

Huella dactilar

Investors
Monitoring
Ownership structure
Entrepreneurial firms
Corporate governance
Short-run
Owners
Cash flow rights
Agency problems
Multiple large shareholders
Governance structure

ASJC Scopus subject areas

  • Finance

Citar esto

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Optimal ownership structure and monitoring in entrepreneurial firms. / Loyola, Gino; Portilla, Yolanda.

En: Finance Research Letters, 01.01.2019.

Resultado de la investigación: Article

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AU - Loyola, Gino

AU - Portilla, Yolanda

PY - 2019/1/1

Y1 - 2019/1/1

N2 - We model the agency problem existing in an entrepreneurial firm between its founder and an outside investor and characterize the optimal corporate governance design. The analysis describes the relationship between two mechanisms: the level of monitoring exerted by the outside investor (short-run) and the ownership structure designed by the founder (long-run). Our results suggest that the optimal corporate governance design resembles a multiple large shareholders (MLS) structure in which a large investor counterbalances the power of the controlling owner. We derive testable implications regarding the separation between control and cash-flow rights and other firm-specific elements influencing the optimal governance structure.

AB - We model the agency problem existing in an entrepreneurial firm between its founder and an outside investor and characterize the optimal corporate governance design. The analysis describes the relationship between two mechanisms: the level of monitoring exerted by the outside investor (short-run) and the ownership structure designed by the founder (long-run). Our results suggest that the optimal corporate governance design resembles a multiple large shareholders (MLS) structure in which a large investor counterbalances the power of the controlling owner. We derive testable implications regarding the separation between control and cash-flow rights and other firm-specific elements influencing the optimal governance structure.

KW - Agency problem

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KW - Monitoring

KW - Multiple large shareholders structure

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