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Constitutional Design and Investment in Cooperatives and Investor-Owned Enterprises

Listed author(s):
  • Alberto Bacchiega
  • Gianni De Fraja

This paper studies the role of the corporate governance systems in cooperatives and in investor-owned enterprises. The difference between the two forms is reduced to the type of majority needed to take decisions: one head one vote for cooperatives and proportional to capital invested in investor-owned firms. We show that the institutional form chosen matters for the initial investment decision of the agents: in particular we find that members of a cooperative invest less than they would in an investor-owned enterprise. This finding tallies with empirical evidence suggesting that cooperatives are undercapitalised.

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File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/1999/9905.pdf
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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 99/5.

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Handle: RePEc:yor:yorken:99/5
Contact details of provider: Postal:
Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom

Phone: (0)1904 323776
Web page: https://www.york.ac.uk/economics/
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  1. Oliver Hart & John Moore, 1996. "The Governance of Exchanges: Members' Co-operatives Versus Outside Ownership," STICERD - Theoretical Economics Paper Series /1996/292, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  2. Schmitz, Patrick W., 2001. "The Hold-Up Problem and Incomplete Contracts: A Survey of Recent Topics in Contract Theory," MPRA Paper 12562, University Library of Munich, Germany.
  3. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  4. Jonathan Levin, 2002. "A Theory of Partnerships," Theory workshop papers 505798000000000002, UCLA Department of Economics.
  5. Michael Kremer, 1997. "Why are Worker Cooperatives So Rare?," NBER Working Papers 6118, National Bureau of Economic Research, Inc.
  6. Oliver Hart & John Moore, 1998. "Cooperatives vs. Outside Ownership," ESE Discussion Papers 114, Edinburgh School of Economics, University of Edinburgh.
  7. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-1320, September.
  8. Eric Maskin & Jean Tirole, 1999. "Unforeseen Contingencies and Incomplete Contracts," Review of Economic Studies, Oxford University Press, vol. 66(1), pages 83-114.
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