Rents and Ownership Concentration
When product market rents are higher, two key constraints on managers — product and capital market competition — weaken. When these constraints on managers weaken, managerial agency costs in the fully public firm and the demand for alternative means to reduce these costs rise. When product market rents are higher, all else being equal, ownership concentration also becomes higher. Meanwhile, as product increases, managerial agency costs inside the firm decrease.
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