EconPapers    
Economics at your fingertips  
 

Unbundling Ownership and Control

Daniel Ferreira, Emanuel Ornelas and John Turner ()

No 6257, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Treating control as an asset that can be bought and sold, we introduce a model of the simultaneous and separable trading of ownership and control in a private information setting. The model provides a novel explanation for the prevalence and persistence of the separation of ownership from control in modern corporations: efficiency in the market for corporate control is more easily achieved when ownership is not concentrated in the hands of the manager. The central reason is that low managerial ownership reduces informational rents in the market for control. Using a mechanism design approach, we fully characterize the optimal mechanism for restructuring ownership and control. Under the optimal mechanism, corporations typically increase the number of shares of the incumbent manager if he remains in control, and give him a generous golden parachute that includes both stock and cash if he is deposed. By contrast, combining ownership and control is optimal only if agency costs are extreme.

Keywords: corporate control; mechanism design; ownership; restructuring (search for similar items in EconPapers)
JEL-codes: D82 G32 G34 (search for similar items in EconPapers)
Date: 2007-05
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=6257 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Unbundling Ownership and Control (2015) Downloads
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:cpr:ceprdp:6257

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=6257

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2019-05-28
Handle: RePEc:cpr:ceprdp:6257