Rahul Mukherjee (The Graduate Institute, Geneva)

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Centre for Development Economics
and
Department of Economics, Delhi School of Economics

ANNOUNCE A SEMINAR

Institutions, Corporate Governance and Capital Flows

by

Rahul Mukherjee
The Graduate Institute, Geneva

Thursday, February 2, 2012  at 3 p.m.

Venue : AMEX Conference Room (Second Floor)
Department of Economics, Delhi School of Economics

All are cordially invited

Abstract

Countries with weaker domestic institutions hold fewer foreign assets and exhibit concentrated corporate ownership. An equilibrium business cycle model of international capital flows with corporate governance frictions between outside and insider investors explains both phenomena. Investment dynamics under insider control leads relative dividend and labor income for outsiders to be more negatively correlated in countries with weaker institutions. Consequently, outsiders hold more domestic assets to hedge labor income risk. I provide empirical evidence on this hedging demand. Concentrated ownership arises because international diversification through the sale of domestic assets by insiders is penalized by lower stock market valuation.