This paper examines whether firms in non-competitive industries benefit relatively more from good governance than do firms in competitive industries. Consistent with this hypothesis, we find that weak governance firms, as measured by the G-index, have lower equity returns, worse operating performance, and lower firm value, but only so in non-competitive industries. When we examine the nature of the underlying agency cost, we find that weak governance firms have lower labor productivity, higher input costs, and make more value-destroying acquisitions, but, again, only so in non-competitive industries. We also find that weak governance firms in non-competitive industries are more likely to be targeted by activist hedge funds, suggesting that investors are taking actions to mitigate the inefficiency.
“Reading and thinking. The beauty of doing it, is that if you’re good at it, you don’t have to do much else" Charlie Munger. "La cantidad de energía necesaria para refutar una gilipollez es un orden de magnitud mayor que para producirla" Paul Kedrosky «Nulla dies sine linea» Antonio Guarino. "Reading won't be obsolete till writing is, and writing won't be obsolete till thinking is" Paul Graham.
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