• Graduate Program
    • Why study Business Data Science?
    • Program Outline
    • Courses
    • Course Registration
    • Admissions
    • Facilities
  • Research
  • News
  • Summer School
    • Deep Learning
    • Machine Learning for Business
    • Tinbergen Institute Summer School Program
    • Receive updates
  • Events
    • Events Calendar
    • Events archive
    • Summer school
      • Deep Learning
      • Machine Learning for Business
      • Tinbergen Institute Summer School Program
      • Receive updates
    • Conference: Consumer Search and Markets
    • Tinbergen Institute Lectures
    • Annual Tinbergen Institute Conference archive
  • Alumni

Boot, A., Gopalan, R. and Thakor, A. (2006). The entrepreneur's choice between private and public ownership The Journal of Finance, 61(2):803--836.

  • Journal
    The Journal of Finance
View publication

We analyze an entrepreneur/manager's choice between private and public ownership. The manager needs decision-making autonomy to optimally manage the firm and thus trades off an endogenized control preference against the higher cost of capital accompanying greater managerial autonomy. Investors need liquid ownership stakes. Public capital markets provide liquidity, but stipulate corporate governance that imposes generic exogenous controls, so the manager may not attain the desired trade-off between autonomy and the cost of capital. In contrast, private ownership provides the desired trade-off through precisely calibrated contracting, but creates illiquid ownership. Exploring this tension generates new predictions.