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Privatization and Restructuring: An Incomplete-Contract Approach

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  • Dieter Boes

Abstract

If an enterprise is restructured prior to privatization, underinvestment in restructuring is very likely. This is a special hold-up problem in privatization. Efficient restructuring can be attained if it is performed by either the buyer or a cash-revenue maximizing privatization agency. Both-sided efficient restructuring can never be achieved, neither by at-will contracts, nor by option contracts, by a special renegotiation design or by a setting where one party restructures before the contract has been signed. The worst scenario is a privatization agency which maximizes political support. This agency may even decide to privatize firms with negative value.

Suggested Citation

  • Dieter Boes, 1999. "Privatization and Restructuring: An Incomplete-Contract Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 155(2), pages 362-362, June.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(199906)155:2_362:paraia_2.0.tx_2-9
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    Cited by:

    1. Fares, M’hand, 2005. "Quels fondements à l’incomplétude des contrats?," L'Actualité Economique, Société Canadienne de Science Economique, vol. 81(3), pages 535-555, Septembre.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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