Game theory model of corporate governance: Fitting real market environment

Abstract

Abstract This paper uses two game models to fit the market subject behavior in corporategovernance from the dynamic and static dimensions. Further expanding the maingovernance subjects and adding variables with practical significance, suchas "bribery" and "social welfare," into the game theory model, some conclusions withpractical significance are found in this paper. For example, the factors such as thepossibility of checking out manager's violation, the punishment of the irregularities, and the supervision cost of the supervisory board, have an essential impact onthebehavior of corporate governance. In the static game model, this paper finds that intersubjective games and restrictions prevent “the worst result” fromoccurring. Besides, social welfare even can be improved under certain conditions. Inthemulti-coexistence game model, the equilibrium point of the static game model is uncertain, which makes the social welfare situation uncertain. The conclusions of thegame models can be used for reference to improve the corporate governancemechanism. JEL classification: G30; M10; D21; D81