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All in the Family or Public? Law and Appropriative Costs as Determinants of Ownership Structure

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Author Info
Castillo, Ramon
Skaperdas, Stergios

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Abstract

We examine how the legal protection of outside shareholders and the appropriative costs that they induce influence the incentives for private firms to go public. A higher degree of protection of shareholders can increase the appropriative costs associated with the conflict between managers and shareholders. To counteract this effect the managers/owners increase the share of the firm they retain so that, overall, higher protection of outsiders increases the likelihood of going public. In addition, we examine how the share of funds raised used to finance the firm affects both appropriative costs and the decision to sell.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 921.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_921

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Find related papers by JEL classification:
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
K22 - Law and Economics - - Regulation and Business Law - - - Corporation and Securities Law

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  10. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June. [Downloadable!] (restricted)
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  11. Muller, Holger M & Warneryd, Karl, 2001. "Inside versus Outside Ownership: A Political Theory of the Firm," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 527-41, Autumn.
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  13. Farmer, Amy & Pecorino, Paul, 1999. " Legal Expenditure as a Rent-Seeking Game," Public Choice, Springer, vol. 100(3-4), pages 271-88, September. [Downloadable!] (restricted)
  14. Burkart, Mike & Gromb, Denis & Panunzi, Fausto, 1997. "Large Shareholders, Monitoring, and the Value of the Firm," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 693-728, August.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ramón A. Castillo Ponce, 2007. "Entre familia y amigos: la elección de la estructura de propiedad corporativa," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 22(1), pages 3-18. [Downloadable!]
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