I characterize the effects of empirically observed managerial incentives on long-run oligopolistic competition. When managers have a preference for smooth time-paths of profits – as revealed by the empirical literature on ‘income smoothing’ – manager-led firms can sustain collusive...

We develop a model of internal governance where the self-serving actions of top management are limited by the potential reaction of subordinates. We find that internal governance can mitigate agency problems and ensure firms have substantial value, even without any external governance. Internal...

We look at the corporate performance of family firms listed on the French stock exchange between 1994 and 2000. On the French stock market, approximately one third of the firms are widely held, another third are founder controlled and the remaining third are heir-controlled family firms. We find...

This paper interprets the existing evidence on enterprise restructuring in Poland, Hungary and the Czech Republic. Despite differences in restructuring policies, the pattern of observed restructuring appears similar in the three countries. Contrary to initial expectations, managers of SOEs have...

This Paper explains both the onset of the financial crisis in 1998 and the striking economic recovery afterwards in Russia and other Former Soviet Union (FSU) economies. Before the crisis banks do not lend to the real sector of the economy, and firms use non-bank finance - including trade...

We show that the development of the financial sector does not change monotonically over time. In particular, we find that by most measures, countries were more financially developed in 1913 than in 1980 and only recently have they surpassed their 1913 levels. This pattern is inconsistent with...

Financial frictions have been identified as key factors affecting both short-term economic fluctuations and long-term growth. An important policy question therefore is whether institutional reforms can reduce financial frictions and, if so, which reforms are best? We address this question by...

This paper studies the relationship between leverage and growth, focusing on a large sample of firms in emerging economies of central and eastern Europe (CEE). Contrary to the general wisdom, we find that deviation from optimal leverage, especially excess leverage, is common among firms in many...

We test under what circumstances boards discipline managers and whether such interventions improve performance. We exploit exogenous variation due to the staggered adoption of corporate governance laws in formerly Communist countries coupled with detailed ‘hard’ information about the...

This paper investigates a hitherto unexplored rationale for firms to enter into joint ventures. We model risky projects with autocorrelated productivity shocks as creating an option value of investing over time so that later investments benefit from the information revealed by the realization of...