TITLE:
Does Corporate Governance Matter for Social Efficiency of Entry?
AUTHORS:
Ting-Chung Tsai, Chen-Chia Fan, Jen-Yao Lee
KEYWORDS:
Corporate Governance, Oligopolistic Competition, Social Efficiency
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.4,
July
11,
2023
ABSTRACT: We adopt the notion of cost reduction that comes
from better and good governance within the firm’s organization, and explore the
strategic interaction between corporate governance and market competition. The
question we are asking is that does corporate governance matter for
social efficiency of entry in oligopolistic competition. We find that if entry
costs are relatively large, the entry into the society is insufficient. The
number of low-efficiency firms under free entry equilibrium is less than the
number of low-efficiency firms under welfare maximization. The important
implication of our finding is that competition-promoting policy in
oligopolistic industry needs the support from internal governance of the firms.