Information and the Optimal Ownership Structure of Firms

Niko Matouschek

No 3216, CEPR Discussion Papers from Centre for Economic Policy Research

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.

Keywords: Vertical integration; Bargaining inefficiency; Private information; Property rights (search for similar items in EconPapers)
JEL-codes: D23 D82 (search for similar items in EconPapers)
Date: 2002-02
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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