Special Investment, Optimal Partial Ownership and Incentive Efficiency

摘要

A theoretical explanation for partial ownership arrangement existing among group members is provided under the background of specific investment between vertical suppliers and buyers. Based on the models taking the specific investment degree parameter as the selective variables of the upstream firm, the results show that, the simple take-or-pay contract can not solve the low-efficient specific investment problem, and only equity participation plus simple contract can improve the efficiency of specific investment. In addition, in the case that shares are purchased at premium price, the optimal equity participation ratio of the downstream firm in the publicly traded upstream firm should increase with the increase of its bargaining power, but decrease with the increase of the upstream firm's outside option value. In final, the interactions between the optimal partial ownership and special investment efficiency are discussed.