 MORAL HAZARD AND LABOUR‐MANAGED FIRMS IN ITALY AFTER THE LAW N. 142/2001Francesco Reito Annals of Public and Cooperative Economics, 2008, vol. 79, issue 2, 249-267 Abstract: ABSTRACT**: Instead of focusing on the difference between a labour‐managed (LMF) and a profit maximizing firm (PMF) in terms of final out‐come and occupation, this paper considers the actual possibility for a firm to be financed from outside. A simple case of moral hazard in the credit market is analyzed. A bank, for limited funds, can finance one of two potential firms, a LMF or a PMF, both with similar project size. The Italian case is taken into account: the law n. 142/2001 has equalized the position of workers and members of a LMF as (own) firm creditors during a liquidation. This has an effect on the structure of creditors priorities in case a firm goes bankrupt and, in particular, on money‐lenders likelihood of getting their loans back. It is argued that, before the law, the LMF had in general an advantage on the PMF, from banks viewpoint, for it faced a lower moral hazard problem on effort contribution. After the law, even though the direct consequence seems to be a draw back in LMF credit‐worthiness, the model shows that, on given conditions, this type of firm remains more competitive as a bank borrower. Date: 2008 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:annpce:v:79:y:2008:i:2:p:249-267 Ordering information: This journal article can be ordered from Access Statistics for this article Annals of Public and Cooperative Economics is currently edited by Marco Marini More articles in Annals of Public and Cooperative Economics from Wiley Blackwell |
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