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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)

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.

Suggested Citation

  • C. Edward Fee, 2002. "The Costs of Outside Equity Control: Evidence from Motion Picture Financing Decisions," The Journal of Business, University of Chicago Press, vol. 75(4), pages 681-712, October.
  • Handle: RePEc:ucp:jnlbus:v:75:y:2002:i:4:p:681-712
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    File URL: http://dx.doi.org/10.1086/341639
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    Citations

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    Cited by:

    1. Don M. Chance & Eric Hillebrand & Jimmy E. Hilliard, 2008. "Pricing an Option on Revenue from an Innovation: An Application to Movie Box Office Revenue," Management Science, INFORMS, vol. 54(5), pages 1015-1028, May.
    2. repec:eee:corfin:v:44:y:2017:i:c:p:425-439 is not listed on IDEAS
    3. Abraham Ravid, S., 2004. "Hollywood Economics: How extreme uncertainty shapes the film industry, Arthur De Vany; Routledge, London and New York, 2004, pages xvi + 308, ISBN 0-415-31260-4 (hbk), $135.00, 0-415-31261-2 (pbk), $3," Journal of Economic Psychology, Elsevier, vol. 25(6), pages 895-898, December.
    4. Darlene Chisholm & George Norman, 2012. "Spatial competition and market share: an application to motion pictures," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 36(3), pages 207-225, August.
    5. Darlene Chisholm & Víctor Fernández-Blanco & S. Abraham Ravid & W. David Walls, 2015. "Economics of motion pictures: the state of the art," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 39(1), pages 1-13, February.
    6. 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.
    7. Liran Einav & S. Ravid, 2009. "Stock market response to changes in movies’ opening dates," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 33(4), pages 311-319, November.
    8. 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.
    9. 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.
    10. 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.
    11. W. Walls, 2010. "Superstars and heavy tails in recorded entertainment: empirical analysis of the market for DVDs," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 34(4), pages 261-279, November.
    12. William Goetzmann & S. Ravid & Ronald Sverdlove, 2013. "The pricing of soft and hard information: economic lessons from screenplay sales," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 37(2), pages 271-307, May.
    13. repec:bla:jindec:v:64:y:2016:i:4:p:755-772 is not listed on IDEAS
    14. Wen-jhan Jane & Wei-peng Chen & Yuan-lin Hsu, 2015. "The impact of deregulation on the movie box office after Taiwan’s entry into the WTO: the difference-in-differences estimation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 289-308, December.
    15. S. Ravid & John Wald & Suman Basuroy, 2006. "Distributors and film critics: does it take two to Tango?," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 30(3), pages 201-218, December.
    16. S. Ravid, 2005. "The Big Picture: The New Logic Of Money And Power In Hollywood," Journal of Cultural Economics, Springer;The Association for Cultural Economics International, vol. 29(3), pages 239-242, August.

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