Privatization and Restructuring: An Incomplete-Contract Approach

September 1, 1996

Preview Citation

Format: Chicago

Dieter Bös. Privatization and Restructuring: An Incomplete-Contract Approach, (USA: International Monetary Fund, 1996) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Since an enterprise, which is to be privatized, has to be restructured in uncertainty, and the restructuring investments are sunk when the final decision on the sale price is taken, there is an imminent danger that restructuring is not efficient, and there is underinvestment. We consider, restructuring by the private buyer of the firm, by a government privatization agency, and by both. In the first two cases—one-sided restructuring—a first best can be achieved. In the case of both-sided restructuring, however, the first best cannot be reached if both parties engage in restructuring after signing the contract.

Subject: Economic sectors, Privatization

Keywords: Key-sector enterprise, Net value, Private buyer, Privatization, Privatization agency, Restructuring effort, Restructuring investment, Utility function, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1996/101
Stock No:

WPIEA1011996
ISBN:

9781451852486
ISSN:

1018-5941

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