Financialisation and corporate governance: Understanding mechanisms through evolutionary game theory

   Department of Economics

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  Dr Steven Bosworth  Applications accepted all year round  Self-Funded PhD Students Only

About the Project

All the way back in 1988, Andrei Schleifer and Lawrence Summers posited that leveraged buyouts may result in companies being run less efficiently if buyers are able to use their newfound control to break the company’s relational contracts (e.g. defunding pensions). Since then the size of the financial sector in industrialised economies has grown apace. Compelling empirical evidence suggests that financialisation is a major contributor to income inequality (Lin and Tomaskovic-Devey, 2013) and might actually impede economic growth (Arcand, Berkes, and Panizza, 2015).

A big unanswered question is how investors profit by running firms inefficiently, and why they are able to out-compete firms which honour their relational contracts. One answer may lie in the microeconomics of firm organisation: Fehr, Gächter, and Kirchsteiger (1997) show that relational contracts can sometimes reduce profits even when they improve efficiency. So principals may extract more rents when they are untrustworthy. We still don’t know why allowing ownership to change hands in financial markets would cause a shift in organisational strategy however.

The investigator seeks proposals that will utilise game theoretic methods to explain why financial markets may favour the survival of myopic management strategies. We foresee the results of such an explanation yielding policy insights which might improve firm governance and reduce economic inequality. The implications of these models should eventually also be tested in laboratory experiments and novel predictions taken to existing secondary data on firms.

Department of Economics, University of Reading:

The Department of Economics has a long and established track record of research, working with a wide variety of industrial and academic partners to achieve significant social and economic benefits. Research activity within the Department is broad and extensive; among our most active fields are business economics, development economics, behavioural economics, labour economics and sports economics.

We have an active community of 20-30 PhD students and provide you with the opportunity to carry out your studies and learn in a highly collaborative environment, putting you on the path to a successful career.

We offer flexible modes of study designed to fit with your needs. Our PhDs are available for study on a full-time basis over three years and part-time over four to six years, starting in the autumn term of the academic year. Both full-time and part-time variants are available for study in Reading, or at a distance for students who live outside the UK.


Applicants should have a good master degree in Economics or on a strongly-related discipline. Applicants will also need to meet the University’s English Language requirements. We offer pre-sessional courses that can help with meeting these requirements. Submit an application for a PhD in Economics at

Business & Management (5) Economics (10) Finance (14) Politics & Government (30) Psychology (31) Sociology (32)

Funding Notes

Funding opportunities are available on a competitive basis through the Economic and Social Research Council (ESRC) South East Network for Social Sciences (SeNSS). You can find more information here:


Arcand, J. L., Berkes, E., & Panizza, U. (2015). Too much finance? Journal of Economic Growth, 20, 105-148.
Fehr, E., Gächter, S., & Kirchsteiger, G. (1997). Reciprocity as a contract enforcement device: Experimental evidence. Econometrica, 65(4), 833-860.
Lin, K.-H. & Tomaskovic-Devey, D. (2013). Financialization and U.S. Income Inequality, 1970–2008. American Journal of Sociology, 118(5), 1284-1329.
Schleifer, A. & Summers, L. H. (1988). Breach of trust in hostile takeovers. In: A. Auerbach (Ed.) Corporate Takeovers: Causes and consequences, pp. 33-67. Cambridge, MA: NBER.

Where will I study?

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