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Competing for Ownership

Author

Listed:
  • Patrick Legros

    (ECARES, Universite Libre de Bruxelles)

  • Andrew F. Newman

    (Institute for Economic Development, Boston University)

Abstract

We study how the internal organization of firms — specifically, the allocation of ownership of assets and the distribution of profit among the firm’s managers — is determined in a competitive market. We ask how scarcity of assets, skills or liquidity in the market translates into ownership and control allocations within organizations. Firms will be more integrated when the terms of trade are more favorable to the short side of the market, when liquidity is unequally distributed among existing firms and when there is a positive uniform shock to productivity. The model identifies a price-like mechanism whereby local liquidity or productivity shocks propagate and lead to widespread organizational restructuring.

Suggested Citation

  • Patrick Legros & Andrew F. Newman, 2004. "Competing for Ownership," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-148, Boston University - Department of Economics.
  • Handle: RePEc:bos:iedwpr:dp-148
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    File URL: http://www.bu.edu/econ/ied/dp/papers/dp148Newman.pdf
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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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