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The Costs of Outside Equity Control: Evidence from Motion Picture Financing Decisions

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  • C. Edward Fee

    (Michigan State University)

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    Abstract

    Recent theoretical work suggests that outside investor control may have costs as well as benefits, particularly in small, entrepreneurial firms. The possibility of investor opportunism can reduce an entrepreneur's incentives to invest personal effort into the firm. I investigate this issue in the context of motion picture financing decisions. Filmmakers face the choice of using studio financing (and giving up control) or of obtaining independent financing (and retaining control). I find that independent financing is more common when a filmmaker's private artistic stake in a film is high and also for films requiring a relatively high level of creative effort.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 75 (2002)
    Issue (Month): 4 (October)
    Pages: 681-712

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    Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:4:p:681-712

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. S. Ravid, 2005. "The Big Picture: The New Logic Of Money And Power In Hollywood," Journal of Cultural Economics, Springer, vol. 29(3), pages 239-242, August.
    2. W. D. Walls, 2009. "The Market for Motion Pictures in Thailand: Rank, Revenue, and Survival at the Box Office," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 8(2), pages 115-131, August.
    3. Yin, Xiangkang, 2008. "Going-public vs. private sales: A two-tiered agency approach," International Review of Financial Analysis, Elsevier, vol. 17(3), pages 523-538, June.
    4. Darlene C. Chisolm & George Norman, 2011. "Spatial Competition and market Share: An Application to Motion Pictures," Discussion Papers Series, Department of Economics, Tufts University 0763, Department of Economics, Tufts University.
    5. Liran Einav & S. Ravid, 2009. "Stock market response to changes in movies’ opening dates," Journal of Cultural Economics, Springer, vol. 33(4), pages 311-319, November.
    6. W. Walls, 2010. "Superstars and heavy tails in recorded entertainment: empirical analysis of the market for DVDs," Journal of Cultural Economics, Springer, vol. 34(4), pages 261-279, November.
    7. S. Ravid & John Wald & Suman Basuroy, 2006. "Distributors and film critics: does it take two to Tango?," Journal of Cultural Economics, Springer, vol. 30(3), pages 201-218, December.
    8. William Goetzmann & S. Ravid & Ronald Sverdlove, 2013. "The pricing of soft and hard information: economic lessons from screenplay sales," Journal of Cultural Economics, Springer, vol. 37(2), pages 271-307, May.
    9. William N. Goetzmann & Vicente Pons-Sanz & S. Abraham Ravid, 2004. "Soft Information, Hard Sell: The Role of Soft Information in the Pricing of Intellectual Property," NBER Working Papers 10468, National Bureau of Economic Research, Inc.
    10. Venkat Kuppuswamy & Carliss Y. Baldwin, 2012. "Risky Business: The Impact of Property Rights on Investment and Revenue in the Film Industry," Harvard Business School Working Papers 13-007, Harvard Business School, revised Aug 2012.

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