IDEAS home Printed from
   My bibliography  Save this article



  • Francesco REITO


Instead of focusing on the difference between a labour-managed (LMF) and a profit maximizing firm (PMF) in terms of final out-come and occupation, this paper considers the actual possibility for a firm to be financed from outside. A simple case of moral hazard in the credit market is analyzed. A bank, for limited funds, can finance one of two potential firms, a LMF or a PMF, both with similar project size. The Italian case is taken into account: the law n. 142/2001 has equalized the position of workers and members of a LMF as (own) firm creditors during a liquidation. This has an effect on the structure of creditors priorities in case a firm goes bankrupt and, in particular, on money-lenders likelihood of getting their loans back. It is argued that, before the law, the LMF had in general an advantage on the PMF, from banks viewpoint, for it faced a lower moral hazard problem on effort contribution. After the law, even though the direct consequence seems to be a draw back in LMF credit-worthiness, the model shows that, on given conditions, this type of firm remains more competitive as a bank borrower. Copyright © 2008 The Authors Journal compilation © CIRIEC 2008.

Suggested Citation

  • Francesco REITO, 2008. "MORAL HAZARD AND LABOUR-MANAGED FIRMS IN ITALY AFTER THE LAW N. 142/2001," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 79(2), pages 249-267, June.
  • Handle: RePEc:bla:annpce:v:79:y:2008:i:2:p:249-267

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:annpce:v:79:y:2008:i:2:p:249-267. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.