Asset Ownership and Investment Incentives Revisited

David de Meza and Ben Lockwood

No 269333, Economic Research Papers from University of Warwick - Department of Economics

Abstract: Previous work on the property rights theory of the …rm suggests that in the presence of outside options, asset ownership may demotivate managers. This paper shows that this conclusion relies on the assumption that a manager’s outside option only depends on her own investment. In many cases, an asset owner has the opportunity to continue with a project even if the team breaks up. The investments of non-owners may then be devalued, but are typically not wholly lost to the owner. This weakens the bargaining power of the non-owner. So, in the presence of cross e¤ects, outside options do not necessarily overturn the property of the original Grossman-HartMoore model that an asset transfer may motivate the gainer and demotivate the loser.

Keywords: Agricultural and Food Policy; Industrial Organization (search for similar items in EconPapers)
Pages: 28
Date: 1999-08-08
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uwarer:269333

DOI: 10.22004/ag.econ.269333

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