A Financial-agency Analysis of Privatization: Managerial Incentives and Financial Contracting
Lehigh University Press, 1997 - Political Science - 264 pages
This monograph analyzes two important questions that emerge during the privatization of a state-owned enterprise: who should the chief executive officer be and what financial contract should be offered. The authors argue that the resolution of the chief officer selection and financial contracting problems can accelerate any efficiency gains realized by the enterprise.
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adverse selection agency conflict agency costs agency theory agent Airways Pic Report analysis analyzed assets assumption behavior bondholders British Airways Pic British Gas CEO Problem CEO's effort CEO's expected CEO's remuneration CEO's utility CEO's wealth ceteris paribus changes chapter compensation consumer surplus contingent cost of bankruptcy costs of capital debt decrease discussed economic efficiency emolument Enterprise Oil enterprise's costs enterprise's performance enterprise's property rights enterprise's sale equation equity example executive expected variance expected wealth figure financial contract financial-agency conflict financial-agency costs financial-contracting process greater human capital hypotheses incentives increase information asymmetry investment issues marginal utility maximization measures moral hazard Oil's optimal owners ownership percent percentage period three perquisite consumption potential principal principal-agent relationship private sector private-sector capital markets privatization process profit proxies remuneration scheme Report and Accounts risk risk-averse scenario sell-off Senbet SOE's specific state-owned valuation variable variance in wealth