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Organizational Prospects, Influence Costs, and Ownership Changes

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Author Info
Meyer, Margaret A
Milgrom, Paul
Roberts, Donald John

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Abstract

We augment efficiency-based theories of ownership by including influence costs. Our principal conclusion is that the prospect of organizational decline and layoffs creates additional influence costs in multi-unit organizations that would be absent if there were no prospect of layoffs and would be lessened or eliminated in focused organizations. This helps explain the tendency of firms to divest poorly performing units, as well as the pattern of sales of such units to firms already in businesses related to that of the divested unit.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 665.

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Date of creation: Jun 1992
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Handle: RePEc:cpr:ceprdp:665

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Related research
Keywords: Acquisitions and Mergers; Divestitures; Firm Boundaries; Influence Costs; Ownership; Politics;

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Find related papers by JEL classification:
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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This page was last updated on 2009-11-25.

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