Corporate finance and corporate governance
Abstract
A combined treatment of corporate finance and corporate governance is herein proposed. Debt and equity are treated not mainly as alternative financial instruments, but rather as alternative governance structures. Debt governance works mainly out of rules, while equity governance allows much greater discretion. A project‐financing approach is adopted. I argue that whether a project should be financed by debt or by equity depends principally on the characteristics of the assets. Transaction‐cost reasoning supports the use of debt (rules) to finance redeployable assets, while non‐redeployable assets are financed by equity (discretion). Experiences with leasing and leveraged buyouts are used to illustrate the argument. The article also compares and contrasts the transaction‐cost approach with the agency approach to the study of economic organization.
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Large institutions may be disinclined to extend relationship-driven small business loans because of Williamson-type organizational diseconomies associated with producing such loans alongside their core business of producing transactions-driven loans and other services for large business customers.
“In addition, large institutions may be disinclined to extend relationship-driven small business loans because of Williamson (1967Williamson ( , 1988) ) type organizational diseconomies associated with producing such loans alongside their core business of producing transactions-driven loans and other services for large business customers.”
From The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle (1998) · cites this paper as Williamson, 1988
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Coase, R. H. (1937) · Economica · doi:10.1111/j.1468-0335.1937.tb00002.x · Cited by 23,972 · see citing works
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A Survey of Corporate Governance
Shleifer, A., & Vishny, R. W. (1997) · The Journal of Finance · doi:10.1111/j.1540-6261.1997.tb04820.x · Cited by 16,243 · see citing works
N. Berger, A., & F. Udell, G. (1998) · Journal of Banking & Finance · doi:10.1016/s0378-4266(98)00038-7 · Cited by 3,690 · see citing works
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What Corporate Governance Can Learn from Catholic Social Teaching
Cremers, M. (2017) · Journal of Business Ethics · doi:10.1007/s10551-016-3127-5 · Cited by 41 · see citing works
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- Authors
- WILLIAMSON, O. E.
- Affiliations
- Indiana University (US)
- Corresponding author
- WILLIAMSON, OLIVER E.
- Venue
- The Journal of Finance
- Publisher
- Wiley
- Published
- 1988-07
- Volume
- 43
- Issue
- 3
- Pages
- 567-591
- ISSN
- 0022-1082 (ISSN-L)
- 1540-6261
- OpenAlex
- W2122753608
- Cited by
- 2,266
- References
- 1
- Citations by year
- 2026: 35 · 2025: 64 · 2024: 59 · 2023: 73 · 2022: 72 · 2021: 88 · 2020: 81 · 2019: 67 · 2018: 69 · 2017: 91 · 2016: 81 · 2015: 105 · 2014: 123 · 2013: 91 · 2012: 105
- FWCI
- 42.64
- Type
- journal article
- Language
- en
- Open access
- closed
- Locations
- The Journal of Finance (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Accounting › Corporate Finance and Governance
- Social Sciences › Business, Management and Accounting › Accounting › Private Equity and Venture Capital
- Social Sciences › Business, Management and Accounting › Accounting › Financial Analysis and Corporate Governance
- Keywords
- corporate finance, corporate governance, debt governance, project financing, transaction costs, leasing, leveraged buyouts, agency theory, economic organization
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