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Control Allocation, Revenue Sharing, And Joint Ownership

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  • Susheng Wang
  • Tian Zhu
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    Abstract

    This article develops a two-period double moral hazard model with incomplete contracting to explore the implication of a possible adverse effect of unilateral control on the optimal revenue sharing and control allocation in a joint venture. We identify conditions under which joint ownership and control become optimal when unilateral control gives the controlling party opportunities to inefficiently extract private benefits at the expense of the joint revenue. Moreover, this adverse consequence of control may also lead to the separation of share ownership and control, i.e., it may be optimal for the minority owner to have the control rights. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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    Bibliographic Info

    Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

    Volume (Year): 46 (2005)
    Issue (Month): 3 (08)
    Pages: 895-915

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    Handle: RePEc:ier:iecrev:v:46:y:2005:i:3:p:895-915

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    Cited by:
    1. Mugele, Christian & Schnitzer, Monika, 2008. "Organization of multinational activities and ownership structure," Munich Reprints in Economics 19200, University of Munich, Department of Economics.
    2. Takanori Adachi, 2010. "Ownership Structure as a Continuous Variable: A Note on Joint Ownership in the Grossman-Hart-Moore Theory of the Firm," Economics Bulletin, AccessEcon, vol. 30(3), pages 2112-2118.
    3. Van Assche, Ari & Schwartz, Galina A., 2013. "Contracting institutions and ownership structure in international joint ventures," Journal of Development Economics, Elsevier, vol. 103(C), pages 124-132.
    4. Ari Van Assche & Galina A. Schwartz, 2013. "Contracting Institutions and Ownership Structure in International Joint Ventures," CIRANO Working Papers 2013s-04, CIRANO.
    5. Steiner, Bodo E., 2009. "The Extent and Nature of Contracting in the Wine Supply-Chain When Moral Hazard is Present," Staff Paper Series 154127, University of Alberta, Department of Resource Economics and Environmental Sociology.

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