The effect of deregulation on corporate governance: A cross-industry study of the relationship and an in-depth review of the trucking industry experience.

摘要

Deregulation of a number of industries in the 1970s and 1980s led to significant economic research on deregulation's effect in increasing allocative and productive efficiency. Starting in the 1980s, ample research also focused on efficiency in corporate governance structures, analyzing the relationship between performance and managerial efficiency. However, little research has examined the effect of deregulation on corporate governance efficiency.; This study's main objective was to determine whether deregulation resulted in increased efficiency in CEO tenure, dismissal and board of directors' size and composition. Multivariate analysis was performed using panel data from 63 firms in seven deregulated industries from 1974 to 1983.; Consistent with theory, this study evidences that corporate governance efficiency improved post-deregulation, but the improvement largely resulted from deregulation's marginal effect on firm size and performance. The study also indicates heterogeneous responsiveness by deregulated industry, supportive of regulatory theory. Industries, in which regulation closely followed the capture theory and had higher regulation-induced monopoly rents, evidenced a stronger efficiency increase post-deregulation.; This study also examined the effect of deregulation on corporate governance efficiency in the trucking industry, focusing on differentiated effects in two common carrier segments, the truckload (TL) and less-than-truckload (LTL) segments. An event study, using weekly returns for twelve trucking firms from 1976 to 1981, was employed to determine differences in TL and LTL stock price reaction to 21 deregulation events. Multivariate analysis was then conducted on panel data for 15 trucking firms from 1974 to 1983 to determine responsiveness of managerial efficiency to deregulation.; The event study demonstrates that LTL firms experienced negative abnormal returns to deregulation events, while TL firms reacted positively, indicating that the LTL sector would require increased efficiency post-deregulation. Consistent with predictions, LTL board size and percentage of outside directors moved more significantly post-deregulation toward greater efficiency. Surprisingly, TL firms indicated a more significant efficiency move in CEO tenure and dismissal.; This paper extends understanding of the relationship between regulation and managerial inefficiency and evidences that deregulation ameliorates this inefficiency. The study also expands knowledge about regulatory theory and factors that indicate increased post-deregulation corporate governance efficiency.