TITLE:
Application of New Institutional Economics in Corporate Governance Optimization
AUTHORS:
Junzhe Zhao
KEYWORDS:
New Institutional Economics, Corporate Governance, Transaction Costs, Property Rights Theory, Contract Theory
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.14 No.11,
November
29,
2024
ABSTRACT: New Institutional Economics provides a unique analytical perspective for understanding and improving corporate governance. This study explores the application of New Institutional Economics theory in corporate governance optimization. The research first reviews the core concepts of New Institutional Economics, including transaction costs, property rights, and contract theory. Through comparative analysis, the study points out the advantages of New Institutional Economics over neoclassical economics in explaining corporate governance issues. The research focuses on how transaction cost theory guides the design of internal governance structures, how property rights theory influences the arrangement of ownership structures, and how incomplete contract theory explains the role of the board of directors. Through analysis, the study demonstrates the practice of corporate governance innovation from the perspective of New Institutional Economics. The research also discusses the potential application of New Institutional Economics in addressing emerging governance issues, such as stakeholder governance and ESG governance. However, the study also points out the limitations of New Institutional Economics in quantitative analysis and prediction. To address these limitations, the study proposes an integrated research framework combining empirical methods and behavioral economics. This research provides new insights for the innovative development of corporate governance theory and practice, helping enterprises achieve effective governance in complex institutional environments.