SPECIAL INVESTMENT, OWNERSHIP – HOLDING ARRANGEMENT AND INCENTIVE EFFICIENCY: A THEORETICAL MODEL ANALYSIS ON OWNERSHIP BONDING WITHIN ENTERPRISE GROUP

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Abstract

A theoretical explanation for partial ownership arrangement existing among group members is provided under the background of specific investment between vertical suppliers and buyers. Through installing specific investment degree parameter, relative bargaining capability parameter, outside option value parameter and average premium (discount) price coefficient into the same model framework, some major conclusions are obtained about the relations between the first-best partial ownership and those parameters. In final, the interrelations between the first-best partial ownership and special investment efficiency are discussed, and it’s pointed out that under the conditions of the same technical parameters, the investment efficiency in the case that the upstream firm belongs to public-company type is greater than that in the case of the owner-managed company type.

Keywords: Special Investment, Partial Ownership, Models

How to cite this paper: Lin, X-D. (2008). Special investment, ownership – holding arrangement and incentive efficiency: a theoretical model analysis on ownership bonding within enterprise group. Corporate Ownership & Control, 5(4-3), 393-402. https://doi.org/10.22495/cocv5i4c3p6