 On the shareholders versus stakeholders debateCamelia Bejan Journal of Economic Behavior & Organization, 2024, vol. 218, issue C, 68-88 Abstract: When externalities are present, is the inclusion of the affected stakeholders in the firm's decision process a better solution than the shareholder governance? This paper argues that the internalization of the externality hinges on the available information and the market strategy used by the firm rather than its governance structure. In the absence of income effects (i.e., if preferences are quasi-linear), a market for “customer rights” reveals all the necessary information about the surplus of a homogeneous consumer population. In that case, a Coase-type equivalence obtains: whether the firm uses the information in the interest of its shareholders or all its stakeholders, the outcome in each case is an efficient allocation. With income effects, the market for customer rights may fail. Still, if appropriate information can be obtained, efficiency can be achieved under both governance structures (or neither). Keywords: Firm's objective; Incomplete markets; Shareholders versus stakeholders; Externalities (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:218:y:2024:i:c:p:68-88 DOI: 10.1016/j.jebo.2023.11.031 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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