Firm Value and Its Size: A Model of Cooperation and Agency Costs
63 Pages Posted: 3 Aug 2012
Date Written: December 15, 2011
Abstract
An important variable absent in agency cost analyses is the extent of cooperation among the manager and the investors. Two types of cooperation are studied: 1.) generalized cooperation, a concept close to social capital; and 2.) discriminating cooperation, a concept close to cooperation with relatives. These types of cooperation affect managerial private benefits differently; while generalized cooperation reduces agency costs, discriminating cooperation may enlarge them, until the manager becomes highly close toward his cooperating investor.
Keywords: corporate governance, cooperation, altruism, firm performance
JEL Classification: G3, G32
Suggested Citation: Suggested Citation