Capital Markets and Corporate Governance in Japan, Germany, and the United States: Organizational Response to Market Inefficiencies

By Helmut M. Dietl | Go to book overview

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THEORETICAL FRAMEWORK
The objective of this chapter is to develop a theoretical framework which explains the prevailing variety of organizational modes of capital allocation and corporate governance in terms of comparative organizational efficiency. The chapter is divided under six main headings:
1 introducing the investment relation as the basic unit of analysis
2 defining investment relation costs as the comparative efficiency criterion
3 identifying of the relevant dimensions of an investment relation
4 classifying of alternative regulatory environments
5 characterizing of alternative organizational modes of capital allocation and corporate governance
6 matching of each type of investment relation in an efficiency discriminating manner with a particular organizational mode of capital allocation and corporate governance.

INVESTMENT RELATION

The investment relation is the basic unit of analysis. It consists of at least two parties: an investor who provides capital and a firm which uses capital for investment purposes. In exchange for the provision of capital, investors receive contingent ownership and decision rights. In states of solvency, for example, the suppliers of equity will retain the decision rights over the firm’s assets while the suppliers of debt will receive pre-specified interest and principal payments. In case of default, on the other hand, the decision rights over the firms remaining assets will be transferred from the suppliers of equity to the suppliers of debt.

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Capital Markets and Corporate Governance in Japan, Germany, and the United States: Organizational Response to Market Inefficiencies
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Illustrations vi
  • Acknowledgements viii
  • Introduction 1
  • 1 - Theoretical Framework 4
  • 2 - Empirical Evidence from Germany, Japan and the United States 111
  • Summary 161
  • Appendices 166
  • Notes 170
  • Bibliography 182
  • Name Index 190
  • Subject Index 193
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