 Large Shareholders, Private Benefits of Control and Optimal Schemes for PrivatizationFrancesca Cornelli and David Daokui Li No 891, CEPR Discussion Papers from Centre for Economic Policy Research Abstract: We analyze optimal schemes for privatization in a transitional economy. In many cases, established Western firms are good candidates for large shareholders of a local firm, since the sale of the shares can generate large amount of revenues and furthermore, in the future, the home country can free-ride on the efficiency improvement of the firm. However, not all Western firms are good owners. Some of them are more interested in the private benefit of control than the potential of efficiency improvement. Such Western firms are bad owners in the long run, although they may well be willing to pay a high price to obtain the control right. Assuming that the government cares about a convex combination of sales revenue and the future value of the firm, we show that the optimal scheme is dependent upon the magnitude of the control benefit. Moreover, we show that the number of shares sold is a crucial instrument to attract the most efficient company. Keywords: East European Privatization; Optimal Auction; Private Benefits of Control (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:cpr:ceprdp:891 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK. |
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