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Please use this identifier to cite or link to this item: http://hdl.handle.net/2451/26581

Title: Inside vs Outside Ownership: A Political Theory of the Firm
Authors: Mueller, Holger M.
Warneryd, Karl
Issue Date: 23-Apr-2001
Series/Report no.: FIN-01-032
Abstract: If contracting within the firm is incomplete, managers will expend resources on trying to appropriate a share of the surplus that is generated. We show that outside ownership may alleviate the deadweight losses associated with such costly distributional conflict, even if all it does is add another level of conflict. In case managers have to be provided with incentives to make firm-specific investments, there is a tradeoff between minimizing conflict costs and maximizing output. This suggests, among other things, an explanation of why some firms are organized as partnerships and others as stock corporations.
URI: http://hdl.handle.net/2451/26581
Appears in Collections:Finance Working Papers

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