Extensive Income and Value of the Firm: Who Gets What?
28 Pages Posted: 30 Jul 2009 Last revised: 23 May 2017
Date Written: July 29, 2009
In the neoclassical model of the firm, value surplus of the firm is assumed to accrue to its owners. Contract model suggests a distribution of the surplus among various agents depending on the imperfections of the markets in which they transact with the firm. If the share of the surplus to an agent declines with the perfection of the market in which he transacts, shareholders should be expected to get only a small piece of the pie, violating the neoclassical assumption. The paper explores an extensive value concept and its measurement for firms. It also examines the implications of extensive value for what we do and do not know about the consequences of corporate mergers and acquisitions.
Keywords: factor income distribution, extensive value, surplus
JEL Classification: D33, L21, M21, M41
Suggested Citation: Suggested Citation