Article | Journal of Finance | October 2011

Concentrating on Governance

by Dalida Kadyrzhanova and Matthew Rhodes-Kropf


This paper develops a novel trade-off view of corporate governance. Using a simple model that integrates agency costs and bargaining benefits of management friendly provisions, we identify the economic determinants of the resulting trade-offs for shareholder value. Consistent with the theory, our empirical analysis shows that provisions that allow managers to delay takeovers have a significant bargaining effect and a positive relation with shareholder value in concentrated industries. By contrast, non-delay provisions have an unambiguously negative relation with value, and more so in concentrated industries. Overall, our analysis suggests that there are governance trade-offs for shareholders, and industry concentration is an important determinant of their severity.

Keywords: Market Participation; Corporate Governance; Business and Shareholder Relations;


Kadyrzhanova, Dalida, and Matthew Rhodes-Kropf. "Concentrating on Governance." Journal of Finance 66, no. 5 (October 2011): 1649–1685.