Financing Employee-managed Firms: Some Problems of a Wider Extension

Lars Engberg
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Lars Engberg: Roskilde University, Denmark

Economic and Industrial Democracy, 1993, vol. 14, issue 2, 277-300

Abstract: A wider extension of employee-managed firms in Western marketa economies is assumed to be limited by three financially related internal obstacles. Employees are: relatively poor, risk-averse and opportunistic. Thus a wider extension implies outside financing (some combination of outside equity and debt). But asymmetric information and opportunism in relation to outside financing lead to agency problems. It is concluded that a wider extension especially to capital-intensive industries implies the building up of separate financial institutions to supply outside financing, some risk-taking by employees to restore incentives and some violation of the employeemanaged firms' autonomy to protect outside financing against default.

Date: 1993
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ecoind:v:14:y:1993:i:2:p:277-300

DOI: 10.1177/0143831X93142007

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