Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098753 | Journal of Economic Dynamics and Control | 2013 | 14 Pages |
Abstract
We study ownership dynamics when the manager and the large shareholder, both risk neutral, simultaneously choose effort and monitoring level respectively to serve their non-congruent interests.We show that there is a wedge between the valuation of shares by atomistic shareholders and the large shareholder's valuation. At the Markov-perfect equilibrium, the large shareholder divests her shares. If the incongruence of their interests is mild, divestment is drastic: all her shares are sold immediately. If their interests diverge sharply, the divestment is gradual in order to prevent a sharp fall in share price. In the limit the firm becomes purely managerial.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Amal Hilli, Didier Laussel, Ngo Van Long,