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Access to financing, rents, and organization of the firm

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Date
2008
Link to item file
http://halshs.archives-ouvertes.fr/halshs-00365983/en/
Dewey
Organisation et finances d'entreprise
Sujet
Gouvernance d'entreprise; Rationnement du crédit; Credit rationing; Agency rents; Unitary-form; Forme fonctionnelle; Forme multidivisionnelle; Multi-divisional form
JEL code
G32; G34; G3
Journal issue
Journal of corporate finance
Volume
14
Number
4
Publication date
09-2008
Article pages
337-346
Publisher
Elsevier
DOI
http://dx.doi.org/10.1016/j.jcorpfin.2008.03.001
URI
https://basepub.dauphine.fr/handle/123456789/1020
Collections
  • DRM : Publications
Metadata
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Author
Renucci, Antoine
Type
Article accepté pour publication ou publié
Abstract (EN)
This paper provides a theory for the choice of an organizational structure by the headquarters of a unitary structure concerned about overload. The headquarters can avoid overload by delegating operational decisions to divisions, i.e., moving the firm to a multidivisional structure. We show that under moral hazard these divisions receive rents for incentive purposes, and that the multidivisional structure is able to invest more. Thus, there is a trade-off between increasing investment and paying rents. We also show that this trade-off applies to situations where firms consider engaging in acquisitions and joint ventures, or where entrepreneurs consider resorting to venture capitalists.

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