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Competing for Ownership

  • Patrick Legros

    (ECARES, Universite Libre de Bruxelles)

  • Andrew F. Newman

    ()

    (Institute for Economic Development, Boston University)

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.

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File URL: http://www.bu.edu/econ/ied/dp/papers/dp148Newman.pdf
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Paper provided by Boston University - Department of Economics in its series Boston University - Department of Economics - The Institute for Economic Development Working Papers Series with number dp-148.

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Length: 45 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:bos:iedwpr:dp-148
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Web page: http://www.bu.edu/econ/

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