Private versus Public Ownership: Investment, Ownership Distribution, and Optimality

Salman Shah and Anjan Thakor ()
Additional contact information
Salman Shah: University of Toronto

Finance from University Library of Munich, Germany

Abstract: Examined in this paper is the choice between private and public incorporation of an asset for an entrepreneur (asset owner) who hires a manager and with superior information about the asset's return distribution. Public sale of equity is shown to be the preferred alternative when (a) capital market issue costs are low or (b) the asset's idiosyncratic risk is high and the owner is either sufficiently risk averse or sufficiently 'optimistic' about the asset's expected return. Thus, those assets deemed most valuable by their owners will tend to be publicly incorporated. The paper also explores the impact of incorporation mode--private versus public--and information structure on the firm's investment policy and ownership distribution.

JEL-codes: G (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004-11-11
New Economics Papers: this item is included in nep-fin
Note: Type of Document - pdf; pages: 20
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econwpa.ub.uni-muenchen.de/econ-wp/fin/papers/0411/0411026.pdf (application/pdf)

Related works:
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:wpa:wuwpfi:0411026

Access Statistics for this paper

More papers in Finance from University Library of Munich, Germany
Bibliographic data for series maintained by EconWPA ( this e-mail address is bad, please contact ).