De Meza, David and Lockwood, Ben (2000) Asset ownership and investment incentives revisited. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.562).

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Abstract

Previous work on the property rights theory of the firm suggests that in the presence of outside options, asset ownership may demotivate managers. This paper shows that this conclusion relies on the assumption that a manager’s outside option only depends on her own investment. In many cases, an asset owner has the opportunity to continue with a project even if the team breaks up. The investments of non-owners may then be devalued, but are typically not wholly lost to the owner. This weakens the bargaining power of the non-owner. So, in the presence of cross effects, outside options do not necessarily overturn the property of the original Grossman-Hart-Moore model that an asset transfer may motivate the gainer and demotivate the loser.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Assets (Accounting), Investments, Right of property, Motivation (Psychology)
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Official Date:	May 2000
Dates:	Date Event May 2000 Published
Number:	No.562
Number of Pages:	28
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access (Creative Commons)
Description:	First version, January 1999; this version May 2000

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