Rents and their corporate consequences

Product markets are weaker in some nations than they are in others. Weaker product markets, and the concomitant monopoly rents, can affect corporate g overnance. They can do so directly by loosening a constraint on managers, t hereby increasing managerial agency costs to shareholders-costs that shareh olders would then seek to reduce otherwise. The monopoly profits can also a ffect corporate governance structures indirectly by setting up a fertile fi eld for conflict inside the firm as the corporate players-shareholders, man agers, and employees-seek to grab those monopoly profits for themselves. On e would expect corporate governance structures, laws, and practices in nati ons with monopoly-induced high agency costs to differ from those prevailing in nations with more competition, fewer monopolies, and lower agency costs . And we might speculate that these rents when large and widespread could a ffect democratic politics and law-making: directly by making monopolists po litical targets (and political forces); and indirectly as the players insid e the firm seek to capture those monopoly profits through political action, with political parties and ideologies (and, in time, laws and standards) t hat parallel the players' places inside the firm. Data from the industrial organization, finance economics, and political science literature is consis tent.