GRA 1900 – Master Thesis 01.09.2011 Author: Kim H. Bertheussen The Political Economy of Corporate Governance: Testing a Transaction Cost Approach to Institutional Choice and Corporate Governance in Norway Hand-in date: 01.09.2011 Campus: BI Oslo Examination code and name: GRA 1900 – Master Thesis Programme: Master of Science in Political Economy Page 1 GRA 1900 – Master Thesis 01.09.2011 Index: INTRODUCTION ............................................................................................................................................................................ 3 RESEARCH METHOD: ..................................................................................................................................................................... 4 THEORETICAL BACKCLOTH .................................................................................................................................................... 5 STATE OWNED COMPANIES ............................................................................................................................................................ 5 Raison d’être .......................................................................................................................................................................... 6 STATE-SOE RELATIONSHIPS .......................................................................................................................................................... 7 Depolitication - Faustian bargain or strengthened credibility? ............................................................................................ 9 EXPLAINING INSTITUTIONAL CHOICE ........................................................................................................................................... 10 A mix of many scholars ....................................................................................................................................................... 11 Functionalism Vs non-functionalism.................................................................................................................................. 12 DETERMINING RELATIVE DEGREES OF EXECUTIVE AUTHORITY .................................................................................................... 14 PRINCIPLE-AGENT LITTERATURE – AND WHY LEADERS DELEGATE. ............................................................................................. 15 IMPLEMENTING THE TRANSACTION COST APPROACH: ............................................................................................... 18 HORNS MODEL ............................................................................................................................................................................ 20 APPLYING HORN TO NORWAY ..................................................................................................................................................... 22 The Norwegian ownership structure ................................................................................................................................... 23 USING THE MODEL AS A UNIFYING TOOL ...................................................................................................................................... 24 ANALYSIS ...................................................................................................................................................................................... 26 THE SELECTION OF INSTITUTIONS: ............................................................................................................................................... 26 HYPOTHESES’:............................................................................................................................................................................. 26 BUILDING THE MODEL ................................................................................................................................................................. 27 THE X-MODEL ............................................................................................................................................................................. 28 INDICATOR ’MEDIA’ .............................................................................................................. ERROR! BOOKMARK NOT DEFINED. THE Y-MODEL ............................................................................................................................................................................ 29 INDICATOR: CONCEPTION OF INTENSITY ...................................................................................................................................... 30 MODEL 1 (ISOLATED MODEL) ...................................................................................................................................................... 32 IMPORTANT NOTE TO THE MODEL ................................................................................................................................................ 33 IMPOSING CONTROL VARIABLES .................................................................................................................................................. 33 INDICATOR: PIH .......................................................................................................................................................................... 34 MODEL 2 (WITH CONTROLS) ........................................................................................................................................................ 36 MODEL 3 (WITH CONTROLS, ALLOWING Ε OF SIZE AND CONFLICT COVARY) ................................................................................. 37 RESULTS ........................................................................................................................................................................................ 39 COMMENTS TO FINDINGS: ............................................................................................................................................................ 40 CONCLUSION: .............................................................................................................................................................................. 44 BIBLIOGRAPHY: ........................................................................................................................................................................... 45 APPENDIX...................................................................................................................................................................................... 51 BIVARIATE CORRELATION MATRIX: ALL VARIABLES .................................................................................................................. 51 SYNTAX ONLY CONFLICT – INTENSITY: ....................................................................................................................................... 55 SYNTAX MODEL 2 ....................................................................................................................................................................... 56 SYNTAX MODEL 3 (WITH 47 COMPANIES): ................................................................................................................................... 57 SYNTAX MODEL 3 (WITH 43 COMPANIES): .................................................................................................................................... 58 QUESTIONNAIRE RESULTS: COI BOARD AVERAGES ...................................................................................................................... 59 QUESTIONNAIRES: ....................................................................................................................................................................... 62 ADDITIONAL DATA-DESCRIPTION ............................................................................................................................................... 63 ‘CONFLICT’ INDICATORS: MEDIA, GOVCONF, PARLCONF .................................................................................................... 65 LIST OF SUBSIDIARIES: ................................................................................................................................................................ 66 ALL VARIABLES_SORTED: ........................................................................................................................................................... 68 Page 2 GRA 1900 – Master Thesis 01.09.2011 Introduction The extent to which services should be performed in market or by state, is the everlasting balancing of democracy and efficiency. Equality and liberty. The extent to which power is delegated to politically independent bodies – fixes this balance. One of the core missions of the Political Economist is thus to reveal The politicians’ internal incentive-structure in determining levels of devolution, delegation and intensity of governance towards such independent bodies. For a long time, functionalist theory, economics, organizational theory and sociology have been dominant scholarly camps in search for such answers. Explanations often tend to focus on either (i) the (desired) end-state of the institutional product, (ii) rational choice analysis of the actors making decision and (iii) the sociological situation around the actor. Quantitative