Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm

Posted: 21 Feb 1998

See all articles by David de Meza

David de Meza

London School of Economics Department of Management

Ben Lockwood

University of Warwick - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

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Abstract

This paper studies the Grossman-Hart-Moore (GHM) "property rights" approach to the theory of the firm under alternating-owners bargaining. When managers can pursue other occupations whilst negotiating over the division of the gains from cooperation, the GHM results obtain. If taking the best alternative job terminates bargaining, outcomes are very different. Sometimes an agent with an important investment decision should not own the asset she works with; sometimes independent assets should be owned together; sometimes strictly complementary assets should be owned separately.

JEL Classification: D21, D23, G39

Suggested Citation

de Meza, David Emmanuel and Lockwood, Ben, Does Asset Ownership Always Motivate Managers? Outside Options and the Property Rights Theory of the Firm. Available at SSRN: https://ssrn.com/abstract=61331

David Emmanuel De Meza

London School of Economics Department of Management ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Ben Lockwood (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom
+44 24 7652 8906 (Phone)
+44 24 7657 2548 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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