Ownership , Control , and Incentive
نویسنده
چکیده
The paper shows that the principal can enhance her control over the agents human capital by acquiring the physical capital that is critical for him to create value. However, the enhancement in the control necessarily reduces his incentive to make human capital investment ex ante and to exert e¤ort ex post. This trade-o¤ between control and incentive thus decides the boundary of the rm. The paper also presents a rationale for M-form rms: centralized ownership of physical capital to facilitate coordination, and dispersed payo¤ rights to incentivize divisions.
منابع مشابه
Control vs. Incentive—the Optimal Allocation of Ownership
The paper first differentiates “control” and “incentive”. Then it shows that integration in which the principal gets ownership of the physical assets necessary for the agent to create values enhances control of the principal over the agent’s human capital and thus improve coordination ex post, but that reduces the agent’s ex ante incentive to make human capital investment and ex post incentive ...
متن کاملOwnership Structure and Share Repurchases in an Emerging Market: Incentive Alignment or Entrenchment?
This paper examines how control and ownership structure affect share repurchases in an emerging market where controlling families derive large private benefits. Whereas firms with concentrated ownership often pay cash dividends, firms with weak control rights often repurchase shares. The magnitude of repurchase increases with weak control rights, but decreases with strong foreign ownership. The...
متن کاملIdiosyncratic Risk and Disclosure of Corporate Social Responsibility: Emphasizing the Role of Corporate Governance
In this study, the impact of corporate social responsibility (CSR ) disclosure on idiosyncratic risk has been investigated concerning three stakeholder theory, information asymmetry, and risk management. It also goes further and explores the impact of some corporate governance mechanisms such as ownership structure, board characteristics, and incentive contracts on this relationship. To achieve...
متن کاملReload Employee Stock Option Plans: Incentive Alignment or Rent Extraction
Abstract: A reload option awards a new option for every share tendered to exercise an existing option. We use a sample of 242 firms that adopted reload provisions to investigate claims that firms use reload options to encourage early exercise and increase share ownership (incentive alignment) against the competing claim that reloads transfer wealth from shareholders to managers. We find that CE...
متن کاملDo Ownership Structures Affect the Risk Incentive Provided by Managerial Portfolio Holdings? An Empirical Analysis of UK Alternative Investment Market Companies
This paper analyzes the wealth and risk incentive effects of managerial options and shareholdings on the hedging probability of UK listed Alternative Investment Market (AIM) companies. We find that the wealth incentive effect provided by managerial option holdings increases the hedging likelihood. On the contrary, the wealth incentive effect provided by managerial shareholdings decreases the he...
متن کامل