The objective of a firm in the presence of market imperfections.

摘要

If markets are imperfectly competitive or incomplete, the conflict of interest among shareholders, who are consumers, investors and receivers of firm's dividends, may render the standard profit maximization inadequate as firm's objective. This dissertation proposes an alternative objective: maximization of shareholders' average wealth. It is proved that, if the firm chooses a production plan following this objective, then there is no other production plan that is unanimously preferred by all shareholders, even if side payments are permitted. If markets are competitive, it is shown that shareholders' average wealth maximization is equivalent to the Grossman-Hart objective, which has been extensively studied in economic theory. If markets are perfectly competitive and complete, then maximization of the shareholders' average wealth is equivalent to profit maximization.; As long as markets are incomplete, a firm that maximizes its shareholders' average wealth has incentives to issue new securities and its financial structure is not irrelevant (thus Modigliani-Miller theorem fails). However, it is shown that even when issuing securities is costless, a firm may not choose to introduce enough new securities to complete the markets. As a result, equilibrium allocations are, typically, Pareto suboptimal. Yet, if all consumers have mean-variance or linear risk tolerance expected utilities, equilibria are Pareto optimal.; This dissertation also points out to the role of the firms' ownership structures in achieving efficiency in large economies. It is shown that, if markets are complete, the equilibria of an economy with a large number of firms which maximize their shareholders' average wealth are approximately perfectly competitive (and thus approximately efficient) if firms have concentrated ownerships. If, on the contrary, firms have diffuse ownerships, strong inefficiencies can persist even in arbitrarily large economies. A characterization of ownership structures that guarantee competitive equilibrium outcomes (and thus efficiency) in an idealistic economy with a continuum of firms is obtained. The condition is that every firm have at least one large shareholder. Firms with a large number of small shareholders do not satisfy the condition.