American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Just Enough or All: Selling a Firm
American Economic Journal: Microeconomics
vol. 8,
no. 3, August 2016
(pp. 223–56)
Abstract
We consider the problem of selling a firm to a single buyer. The buyer privately knows post-sale cash flows and the benefits of control. Unlike the case where buyer's private information is one-dimensional, the optimal mechanism is a menu of tuples of cash-equity mixtures. When the seller wants to screen finely with respect to the private benefits, he makes an offer for the smallest fraction of the company that facilitates the transfer of control. When he wants to screen finely with respect to cash flows, he makes an offer for all the shares of the company.Citation
Ekmekci, Mehmet, Nenad Kos, and Rakesh Vohra. 2016. "Just Enough or All: Selling a Firm." American Economic Journal: Microeconomics, 8 (3): 223–56. DOI: 10.1257/mic.20140143Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D82 Asymmetric and Private Information; Mechanism Design
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
There are no comments for this article.
Login to Comment