Determination of Manager's Share to Maximize Social Welfare According to Market Structure
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Worldwidely many countries have experienced privatization of public firms and the purpose of the privatization seems to be to increase efficiency of the firm without considering social welfare. This paper is on how to determine optimal manager's share to maximize social welfare in the process of privatization of public firm. As manager's share increases, he has more stakes in the firm, and he tries to increase profit. Manager's share has two effects. One is decreasing agency cost. In order to increase the firm's profit, he reduces deriving personal benefit from the firm's resources. The other is decreasing consumer's surplus by pursuing monopolistic profit and decreasing the amount of production. So, manager's share must be determined to maximize social welfare in the process of privatization of a public firm. i)This paper shows the existence of optimal manager's share to maximize social welfare. ii)After manager gets the social welfare maximizing share from government, he has incentive to purchase more share through stock market. iii)Optimal manager's share depends on market structure. As the firm's market power decreases, the social welfare maximizing owner-manager's share increases.
Abstract
Worldwidely many countries have experienced privatization of public firms and the purpose of the privatization seems to be to increase efficiency of the firm without considering social welfare. This paper is on how to determine optimal manager's share to maximize social welfare in the process of privatization of public firm. As manager's share increases, he has more stakes in the firm, and he tries to increase profit. Manager's share has two effects. One is decreasing agency cost. In order to increase the firm's profit, he reduces deriving personal benefit from the firm's resources. The other is decreasing consumer's surplus by pursuing monopolistic profit and decreasing the amount of production. So, manager's share must be determined to maximize social welfare in the process of privatization of a public firm. i)This paper shows the existence of optimal manager's share to maximize social welfare. ii)After manager gets the social welfare maximizing share from government, he has incentive to purchase more share through stock market. iii)Optimal manager's share depends on market structure. As the firm's market power decreases, the social welfare maximizing owner-manager's share increases.
참고문헌 (16)
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