Information revelation in the Property Right Theory of the firms

摘要

I incorporate revelation of asymmetric information through shared ownership (partnership) into the Property Right Theory of the firms. Shared ownership is optimal as a joint result of mitigating hold-up and inducing truthful information revelation. Due to the incomplete contracting nature, shared ownership is incentive compatible if it induces truthful information revelation within the relationship as well as when the relationship breaks. Off-the-equilibrium-path incentive compatibility results in the optimality of partnership even for the most efficient type of the informed party. Inefficient investment thus arises. The level of shared ownership depends on the relative magnitude of the information rent effect and the hold-up effect. Shared ownership is robust to semi-truthful information revelation, under which hold-up occurs in equilibrium with an endogenously determined probability related to the revelation strategy. (C) 2017 Elsevier B.V. All rights reserved.