A Financial-agency Analysis of Privatization: Managerial Incentives and Financial ContractingThis 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. |
Contents
| 9 | |
| 11 | |
| 15 | |
Agency Theory and the Contract Problem | 31 |
Critical Elements of Financial Contracting with the CEO of an Enterprise Undergoing Privatization | 52 |
Further Analysis of the Financial Contract | 105 |
Empirical Analysis of Financial Contracting during Privatization | 152 |
Two Case Studies of Privatization | 186 |
Summary of Work and Ideas for Future Research | 226 |
Index | 251 |
Common terms and phrases
adverse selection agency conflict agency costs agency theory agent Airways Plc Report analysis analyzed assets assumption behavior bondholders British Airways Plc British Gas CEO Problem CEO's effort CEO's expected CEO's remuneration CEO's utility ceteris paribus chapter compensation consumer surplus 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 managerial marginal utility maximization measures moral hazard Oil's optimal owners ownership percent Percentage Change 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
Popular passages
Page 22 - the term has many meanings. Privatization is the general process of involving the private sector in the ownership or operation of a state-owned enterprise. Thus, the term refers to the private purchase of all or part of a public company; and it also covers 'contracting out
Page 184 - is intended to provide adequate and accurate disclosure of material facts concerning the company and the securities it proposes to sell.
Page 18 - The principal-agent problem persists in both the private and the public sectors: Management does not necessarily act in the best interests of either widely diffused shareholders or tax-payers, so that effective performance monitoring remains problematic.
Page 15 - (a) a government owned productive organization that (b) is expected to earn a significant portion of its revenues from the sale of the goods or services it produces, (c) possesses an accounting system separate from any government agency that controls or supervises it, and (d) is a distinct legal entity.
Page 33 - Positivist researchers have focused almost exclusively on the special case of the principal-agent relationship between owners and managers of large, public corporations (Berle and Means, 1932).
Page 16 - were made offered precious little guidance as to the best method of divesting state-owned assets, and only limited theoretical analysis of the predictable costs and benefits of privatization.
Page 26 - iii) reducing government involvement in enterprise decision making; iv) easing problems of public sector pay determination; v) widening share ownership; vi) encouraging employee share ownership;
Page 49 - The direct costs of bankruptcy, such as legal fees, appear to be lower for large firms than the conventional wisdom suggests.
Page 68 - rate of return realized by shareholders, is strongly and positively related to managerial remuneration.
Page 32 - that arises when the principal and agent have different attitudes toward risk. The problem here is that the principal and