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Financing Employee-managed Firms: Some Problems of a Wider Extension

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  • Lars Engberg

    (Roskilde University, Denmark)

Abstract

A wider extension of employee-managed firms in Western marketa economies is assumed to be limited by three financially related internal obstacles. Employees are: relatively poor, risk-averse and opportunistic. Thus a wider extension implies outside financing (some combination of outside equity and debt). But asymmetric information and opportunism in relation to outside financing lead to agency problems. It is concluded that a wider extension especially to capital-intensive industries implies the building up of separate financial institutions to supply outside financing, some risk-taking by employees to restore incentives and some violation of the employeemanaged firms' autonomy to protect outside financing against default.

Suggested Citation

  • Lars Engberg, 1993. "Financing Employee-managed Firms: Some Problems of a Wider Extension," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 14(2), pages 277-300, May.
    • Handle: RePEc:sae:ecoind:v:14:y:1993:i:2:p:277-300
    DOI: 10.1177/0143831X93142007
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