The effect of insecure ownership on ordinary investment and on the exploitation of natural resources is examined. Insecure ownership is characterized as a positive probability that a typical asset or its future return will be confiscated. For empirical analysis, the probability of confiscation is modeled as a function of observable political attributes of countries, principally the type of gove...

We analyze the optimal contract to finance the series of investments of a growing firm. The analysis is based on the need to repeatedly raise funds when informed insiders can expropriate outside investors. The optimal contract can be implemented by a sequence of one-period debt contracts and equity ownership by outsiders. Debt is optimal, as it reduces the expected cost of auditing, while parti...

Implementation and maintenance of interorganizational systems (IOS) require investments by all the participating firms. Compared with intraorganizational systems, however, there are additional uncertainties and risks. This is because the benefits of IOS investment depend not only on a firm’s own decisions, but also on those of its business partners. Without appropriate levels of investment by a...

Term insurance Term insurance is what comes to mind when most people contemplate an insurance policy. In this situation, the insured pays a premium to the insurance company on a monthly or yearly basis. These premiums entitle the insured to be paid a benefit in the event of death. The typical policy is applied over a defined period of time. In most instances, the term of the policy is between 1...

We consider an industry where an upstream …rm determines the size of a network used by two downstream …rms. We contrast ownership unbundling and legal unbundling, where the upstream …rm maximizes its total pro…t, including the pro…t of its downstream subsidiary(ies), but does not discriminate between them. Furthermore, each downstream subsidiary maximizes its own pro…t. We show that ownership s...

This paper analyzes the wealth and risk incentive effects of managerial options and shareholdings on the hedging probability of UK listed Alternative Investment Market (AIM) companies. We find that the wealth incentive effect provided by managerial option holdings increases the hedging likelihood. On the contrary, the wealth incentive effect provided by managerial shareholdings decreases the he...

Contingent ownership structures are prevalent in joint ventures. This paper o ers an explanation based on the investment incentives provided by such an arrangement. We consider a hold-up problem in which two parties make relationshipspeci c investments sequentially in order to generate a joint surplus in the future. In our model, the following ownership structure implements rst best investments...