Access to financing, rents, and organization of the firm

Antoine Renucci ()
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Antoine Renucci: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper provides a theory for the choice of an organizational structure by the headquarters of a unitary structure concerned about overload. The headquarters can avoid overload by delegating operational decisions to divisions, i.e., moving the firm to a multidivisional structure. We show that, under moral hazard, these divisions receive rents for incentive purposes, and that the multidivisional structure is able to invest more. Thus, there is a trade-off between increasing investment and paying rents. We also show that this trade-off applies to situations where firms consider engaging in acquisitions and joint ventures, or where entrepreneurs consider resorting to venture capitalists.

Keywords: Unitary-form; Multidivisional-form; Agency rents; Credit rationing (search for similar items in EconPapers)
Date: 2008-09-01
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00365983v1
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Citations: View citations in EconPapers (2)

Published in Journal of Corporate Finance, 2008, 14 (4), pp.337-346. ⟨10.1016/j.jcorpfin.2008.03.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00365983

DOI: 10.1016/j.jcorpfin.2008.03.001

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