A Property Rights Analysis of Newly Private Firms: Opportunities for Owners to Appropriate Rents and Partition Residual Risks

Marguerite Schneider and Alix Valenti

Business Ethics Quarterly, 2011, vol. 21, issue 3, 445-471

Abstract: A key factor in the decision to convert a publicly owned company to private status is the expectation that value will be created, providing the firm with rent. These rents have implications regarding the property rights of the firm’s capital-contributing constituencies. We identify and analyze the types of rent associated with the newly private firm. Compared to public firms, going private allows owners the potential to partition part of the residual risk to bond holders and employees, rendering them to be co-residual risk bearers with owners. We propose that new promotion-based contracts with bond holders and employees, reflecting their particular investments, be negotiated as the firm migrates from public to private status. These contracts should acknowledge the firm’s intent to maximize shareholder value and its need to take the risks necessary to do so, but support that the firm’s survival not be undermined due to its possibly opportunistic owners.

Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:buetqu:v:21:y:2011:i:03:p:445-471_01

Access Statistics for this article

More articles in Business Ethics Quarterly from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().