Creating an incentive for investor intermediaries to improve corporate governance

At the end of the 1980s, there was some speculation that leveraged buyouts (LBOs) would lead to the demise of the public company in favor of privately owned companies after a decade of the market for corporate control serving as a check against agency costs and management inefficiency. Of course, this didn't happen, and throughout the 1990s, in addition to the market for corporate control, the use of stock-based managerial incentives served a similar purpose. But the failure of these measures to prevent the next cycle of corporate governance crises that occurred in the last five years (e.g., WorldCom, Enron) ushered in an era of hard governance whereby market mechanisms and incentives have given way to Sarbanes-Oxley legislation and stock exchange rules designed to ensure proper stewardship of companies by their boards of directors. A central theme of this thesis is that, although this new era of hard governance might have decreased the degree of information asymmetry between investors and their agents, and thus improved the state of corporate governance, it may be that this has simply lulled us into a false sense of security until the next cycle of corporate governance crises. Companies might adopt symbolic mechanisms that are decoupled from actual practice to evidence compliance with increasing rules and regulations.

Department dc:contributor.department

Sloan School of Management.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2006

Author dc:creator

• Gershkowitz, Todd M

Advisor dc:contributor.advisor

• William F. Pounds.

• Sloan School of Management.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/37115

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/37115