We examine the effect of liability protection on the compensation of directors and on takeover outcomes. Consistent with the hypothesis that directors require additional compensation if they bear liability, we find that director compensation is higher for firms that provide less liability...

This paper examines the effect of competition in the product markets on the design of a firm's governance structure. In oligopolies, profits are not just a function of a firm's own actions but also of the actions taken by rivals. Firms therefore behave strategically and commit to actions which...