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Information and the Optimal Ownership Structure of Firms

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  • Matouschek, Niko

Abstract

I develop a property rights theory of the firm in which managers bargain over the sharing of quasi-rents in the presence of private information. I analyse the interdependence between the ownership structure of firms and the bargaining inefficiency that is due to the presence of private information and derive the optimal ownership structure that minimizes the bargaining inefficiency. I first assume that managers can only contract over the ownership structure and show that they optimally choose one that minimizes (maximizes) their aggregate disagreement pay-off if the minimum expected quasi-rents are large (small). I then extend my analysis and allow the managers to contract over the ownership structure and the bargaining game that is played ex-post. I show that the main results continue to hold if and only if ownership structures are deterministic and cannot be made contingent on information that is revealed ex-post.

Suggested Citation

  • Matouschek, Niko, 2002. "Information and the Optimal Ownership Structure of Firms," CEPR Discussion Papers 3216, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3216
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    References listed on IDEAS

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    Cited by:

    1. Garrouste, Pierre & Saussier, Stephane, 2005. "Looking for a theory of the firm: Future challenges," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 178-199, October.
    2. Patrick W. Schmitz, 2006. "Information Gathering, Transaction Costs, and the Property Rights Approach," American Economic Review, American Economic Association, vol. 96(1), pages 422-434, March.

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    More about this item

    Keywords

    Vertical integration; Bargaining inefficiency; Private information; Property rights;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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