Agency Costs in Small Firms

Résumé

We explore how the separation between ownership and control a§ects Örm productivity. Using administrative panel data on the universe of limited liability Örms in Finland, we document a substantial increase in productivity when the CEO obtains majority ownership or when the majority owner becomes the CEO. We exploit plausibly exogenous variations to CEO turnover, induced by shocks to the CEO spouseís health. Extending the analysis beyond typical samples of large public Örms, we show that our e§ects are stronger in medium-sized private Örms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEOís e§ort at work.

Mots-clés

agency costs; Örm productivity,; CEO ownership.;

Codes JEL

G30: General
M12: Personnel Management • Executives; Executive Compensation
D24: Production • Cost • Capital • Capital, Total Factor, and Multifactor Productivity • Capacity
E23: Production
L25: Firm Performance: Size, Diversification, and Scope