Competition Reduces X-Inefficiency - A Note on a Limited Liability Mechanism
AbstractThe study illustrates that a financial restriction may serve as a disciplining device on the internal efficiency of a firm, and that the disciplining power is higher the tougher the product market competition is. The financial restriction is modeled as a limited liability constraint, that is a non-negative profit constraint. Hence, this limited liability mechanism may, in part, account for the disciplining power of product market competition on firm efficiency, alleged by policy makers as well as economists.
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Bibliographic InfoPaper provided by Stockholm - International Economic Studies in its series Papers with number 599.
Length: 28 pages
Date of creation: 1995
Date of revision:
Contact details of provider:
Postal: UNIVERSITY OF STOCKHOLM, INSTITUTE FOR INTERNATIONAL ECONOMIC STUDIES, S- 106 91 STOCKHOLM SWEDEN.
Web page: http://www.iies.su.se/
More information through EDIRC
COMPETITION; FINANCIAL MARKET; ENTERPRISES; CREDIT;
Other versions of this item:
- Stennek, Johan, 1997. "Competition Reduces X-Inefficiency - A note on a Limited Liability Mechanism," Seminar Papers 599, Stockholm University, Institute for International Economic Studies.
- Stennek, J., 1995. "Competition Reduces X-Inefficiency : A Note on a Limited Liability Mechanism," Discussion Paper 1995-56, Tilburg University, Center for Economic Research.
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
- G39 - Financial Economics - - Corporate Finance and Governance - - - Other
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