This paper develops an analytical framework to study how corporate governance is shaped by globalization and technological progress. The model introduces agency problems at the firm level into an open economy model where assortative matching determines the returns to managerial skills. Trade and technological progress increase the competition for managerial talent and give rise to superstar effects. This affects the agency problem inside firms and induces the largest firms in the economy to create incentives with performance payments instead of tight corporate governance. Trade and technological progress can therefore lead to an erosion of corporate governance quality in the economy.
Blog Posts in the category Diversity
Blog Posts in the category Diversity
Blog Posts in the category Digitization
