Corporate Governance -M-

The module offers a theoretical and empirical analysis of the main corporate governance issues where corporate governance refers broadly to the mechanisms which deal with the principal-agent problems between the insiders and the outsiders of corporations. The module looks at the variety of legal systems and other institutions, ownership structures, boards of directors, executive compensation, the relationship between corporate governance and firm value, and governance regulation. A strong emphasis is put on the analysis of how and through which channels corporate governance matters for firm-level and country-level economic performance and whether firm-level actions are effective.

In this course, we will analyze conflicts of interest within the firm and discuss mechanisms to mitigate these problems. Since corporate governance mechanisms vary around the world, the course will briefly present definitions and the underlying concepts and cover the main taxonomies of corporate governance systems developed by financial economists and legal scholars. In addition, the relationship between firm value and corporate governance practices and investor protection will be discussed.

We wil critically assess the empirical evidence on the importance and effectiveness of various corporate governance devices. Special emphasis will be on ownership structures and large shareholder monitoring, the market for corporate control, shareholder activism, the board of directors, codetermination, and executive compensation.

The teaching style will be a combination of classical classroom teaching, group work on cases, and discussion.

Agency Theory, Game Theory, Econometric Techniques

By the end of this course, students should be able to:

1. Contrast different definitions of corporate governance
2. Critically review the principal-agent model
3. Describe differences in corporate control across the world
4. Explain the reasons why control may be different from ownership (rights)
5. Compare the main classifications of corporate governance systems
6. Assess the effectiveness of the different corporate governance mechanisms, such as for example the board of directors, large shareholder monitoring, etc.
7. Critically assess the empirical evidence on the importance and effectiveness of various corporate governance mechanisms

Goergen, Marc (2018). Corporate Governance - A Global Perspective, Cengage. A detailed list of papers and additional readings will be distributed by the beginning of the module.

Interactive Lecture, Case Studies

Final Exam (70 %), Cases (30 %)

Introductory Corporate Finance course, Game Theory (recommended)

125