Subsidies and Corporate Governance – An Agency Approach
Article first published online: 9 MAR 2014
Copyright © 2014 John Wiley & Sons, Ltd.
Managerial and Decision Economics
How to Cite
Hanke, P. C. and Heine, K. (2014), Subsidies and Corporate Governance – An Agency Approach. Manage. Decis. Econ.. doi: 10.1002/mde.2665
- Article first published online: 9 MAR 2014
- Manuscript Accepted: 10 FEB 2014
- Manuscript Revised: 9 JAN 2014
- Manuscript Received: 30 AUG 2013
The literature on subsidies conceives state aids as always beneficial to the aid-receiving firm. However, the picture changes if agency problems are assumed between the managers and owners of the firm. In this case, subsidies may run counter not only to the desired result of the aid grantor but also to the interests of firm owners. Managers may divert subsidies into their own pockets, thereby deflating firm value. Copyright © 2014 John Wiley & Sons, Ltd.