A Contractual Analysis of State versus Private Ownership

41 Pages Posted: 2 Sep 2009 Last revised: 22 Oct 2009

See all articles by Kun Jiang

Kun Jiang

Hong Kong University of Science & Technology (HKUST)

Susheng Wang

Hong Kong University of Science & Technology (HKUST) - Department of Economics; Shanghai University - SHU-UTS SILC Business School

Date Written: June 15, 2009

Abstract

This paper provides a unique contractual analysis of privatization from a state-owned company to a privately-owned company. Using a contractual approach, we analyze the advantages and disadvantages of private ownership versus state ownership under various circumstances. Our analyses focus on three aspects: external risk, internal governance, and relative importance of the owner versus managers. We provide both theoretical and empirical analyses. Our empirical analysis supports our theoretical findings. Our focus on the change in ownership is particularly relevant to the recent debate on nationalizing banks in the wake of the subprime mortgage crisis.

Keywords: contractual analysis, state ownership, private ownership, incentives, external risks, internal corruption

JEL Classification: D23, D73, P31

Suggested Citation

Jiang, Kun and Wang, Susheng, A Contractual Analysis of State versus Private Ownership (June 15, 2009). Available at SSRN: https://ssrn.com/abstract=1465191 or http://dx.doi.org/10.2139/ssrn.1465191

Kun Jiang

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Susheng Wang (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Economics ( email )

Hong Kong
China

Shanghai University - SHU-UTS SILC Business School ( email )

Shanghai
China

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