A Natural Experiment on the Effects of Competition and Exit Threats on Agency Problems : Evidence from an accidental overbuilding of schools
We examine the common belief that increased competition and exit threats improve agent incentives and performance. A natural experiment occurred when government overestimation of post-1997 Chinese immigration caused varying degrees of over-building in Hong Kong school districts. Schools faced more competition and higher probability of closure in districts with more excess capacity (versus less over-built districts). Overall student performance improved after the exit threat emerged, suggesting that competition lowers agency problems and improves market efficiency. However, the improvement was significantly lower in threatened districts with more excess capacity, thus severe exit threats worsened agent incentives and performance.
Keywords: exit threats, competition, agency problems, performance, excess capacity, efficiency,
JEL: I21, D82, H70, R5
학회소식
학회소식
[2011년 제 1차] A Natural Experiment on the Effects of Competition
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게시일 :
2011-02-23