WAGE BARGAINING AND MERGER INCENTIVES WITH ASYMMETRIC COSTS

This paper examines how wage bargaining within each firm influences the relationship between an equilibrium ownership structure and the most preferred ownership structure from the viewpoint of social welfare, in a unionized oligopoly of asymmetric firms with respect to productivity of capital. We consider the merger incentive of each firm’s owner when the wage level is determined through bargaining between the firm’s owner and union. We derive a condition for both the degree of cost asymmetry among existing firms and the relative bargaining power of each firm’s owner to her/his union such that each ownership structure can be observed in equilibrium. We also show that although the two types of ownership structures with the merger involving the least efficient firm can be equilibria and socially optimal, these structures are observed only when both the degree of cost asymmetry and the relative bargaining power of each firm’s owner are moderate. Finally, we analyse the relationship among the cooperative game approach employed in this paper and two non‐cooperative merger formation approaches, and examine the robustness of the results obtained in this paper against the change in the assumption regarding each firm’s cost function.     

Endogenous timing game in a mixed duopoly with partial foreign ownership and asymmetric increasing marginal costs

This study examines a timing game in a mixed duopoly wherein public and private firms compete by taking account of the increasing marginal cost of both firms, as well as partial foreign ownership of the private firm. This study finds that if the private firm has a strong cost advantage over the public firm, public leadership is a risk dominant equilibrium irrespective of foreign ownership ratio. This result means that the cost difference between the public and private firms matters in selecting the risk-dominant equilibrium of the timing game. Additionally, if the private firm has only a weak cost advantage over the public firm, then private leadership (public leadership) is the risk dominant equilibrium if the foreign ownership ratio is (not) small.     

Mergers and partial ownership

We compare the profitability of a merger between two firms in which one firm fully acquires another and the profitability of a partial ownership arrangement in which the acquiring firm, although owning less than 100% of the acquired firm, is nevertheless able to obtain corporate control over all pricing decisions. We find that joint profit can be higher in the latter case because it may result in a greater dampening of competition with respect to an outside competitor when the partial ownership arrangement is publicly observable. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firm and use them to explain puzzling features of the pay-TV markets in Norway and Sweden.     

Partial vertical ownership

A backward ownership interest held by a downstream firm yields a partial rebate of the upstream margin. Input demand increases with backward ownership, and the upstream firm optimally responds by raising price. With symmetric costs, every downstream firm's equilibrium input/output choice is invariant across a class of ownership profiles, including uniform ownership. Moreover, equity trading results in uniform holdings, so partial vertical ownership may have no real effects. With asymmetric costs ex ante, equity trading amplifies the asymmetries and shifts output toward lower-cost firms. With homogeneous goods, this improves producer and total surplus. With differentiated goods, it may harm consumers.     

International Cross-Ownership and Strategic Trade Policies

The paper analyzes a model of strategic trade policies in the presence of international cross-ownership of firms that are heterogenous both in terms of costs and in terms of extent of foreign ownership. The equilibrium pattern of taxes and subsidies is characterized for any arbitrary cross-ownership profile, and any number of heterogenous firms. The equilibrium subsidy (or tax) given to any firm is shown to depend, in a separable manner, on the firm's characteristics and on the covariance of the distribution of cost and foreign ownership across firms. A neutrality theorem is proved concerning the Nash equilibrium of the game between governments: in equilibrium, the pattern of trade, the value of each firm, and world welfare are independent of the ownership pattern.     

出口补贴、企业所有权与外国对华的反倾销调查——基于Poisson模型的理论和实证分析

文章以中国出口导向型经济实践为基础,通过理论建模确立了五个理论假说,它们分别阐明了出口补贴、企业所有权、贸易报复威胁以及WTO贸易制度与外国对华反倾销风险之间的关联性。文章还采用Poisson模型的GEE、FE和RE回归方法,估计了印度、美国、欧盟、阿根廷、土耳其、巴西、南非和澳大利亚等8个国家和地区1995-2009年对华反倾销调查的面板数据,从经验上验证了外国对华反倾销调查的数量与中国的出口退税和对外反倾销调查强度成正比,与外资控制在华出口企业所有权的强度成反比。     

Ownership Structure and Technological Upgrading in International Joint Ventures

In a model of a joint venture between a local and a foreign firm who provide complementary inputs, this paper derives optimal ownership structures under different sharing rules. The local firm's profits may be maximized by assigning a majority share to the foreign firm. Efficiency (i.e., the minimization of double moral hazard) requires that the firm with the more productive input should get majority ownership. When only the foreign firm can upgrade its input, it should receive a larger share than what it receives in the absence of upgrading. The analysis implies that a blanket policy of prohibiting majority foreign ownership is theoretically unfounded.     

Privatization,Underpricing, and Welfare in the Presence of Foreign Competition

We analyze privatization in a differentiated oligopoly setting with a domestic public firm and foreign profit‐maximizing firms. In particular, we examine pricing below marginal cost by the public firm, the optimal degree of privatization, and the relationship between privatization and foreign ownership restrictions. When market structure is exogenous, partial privatization of the public firm improves welfare by reducing public sector losses. Surprisingly, even at the optimal level of privatization, the public firm's price lies strictly below marginal cost, resulting in losses. Our analysis also reveals a potential conflict between privatization and investment liberalization (i.e., relaxing restrictions on foreign ownership) in the short run. With endogenous market structure (i.e., free entry of foreign firms), partial privatization improves welfare through an additional channel: more foreign varieties. Furthermore, at the optimal level of privatization, the public firm's price lies strictly above marginal cost and earns positive profits.     

Ownership Structure and Firm Performance: Evidence from Vietnamese Listed Firms

We examine the effect of ownership structure on firm performance, for firms listed on Vietnamese stock exchanges, using 2744 firm‐year observations over the period from 2007 to 2012. We find a non‐linear relationship between ownership structure and firm performance. State ownership has a convex relationship with firm performance. This paper finds that firm performance increases beyond 28.67 percent level of state ownership. Foreign ownership has a concave relationship with firm performance. We find that firm performance increases with an increase of foreign ownership up to a level of 43 percent and then decreases. Policy makers should encourage foreign ownership and widely dispersed state ownership in firms, which can help improve firm performance.     

Commercial Policy and Foreign Ownership

Foreign multinationals often not only export but also control local firms through FDI. This paper examines the various effects of trade and industrial policies when exports and FDI coexist. We focus on the case in which a foreign firm has full control of a local firm through partial ownership. Cross‐border ownership on the basis of both financial interests and corporate control leads to horizontal market linkages through which tariffs and production subsidies may harm locally owned firms but benefit the foreign firm. Foreign ownership regulation benefits locally owned firms. These results could have strong policy implications for developing countries that attract an increasing share of world FDI.     

我国资源类企业对外投资的有效性——基于合约理论的分析

本文基于合约理论和国际外包的理论模型,探讨我国企业走出去建立合作公司的过程中,由所有权和销售权配置的不同导致努力水平、所有权和销售权配置及相关影响因素。研究发现,所有权与销售权的不同配置对于前期建设、加工及销售产生不尽相同的影响,而前期建设与加工环节之间的正外部性并不对掌握前期建设环节的一方获得相关权利产生积极作用。另外,在资源价格高企的情况下,我国应首先着力与市场完备程度较低地区的外国企业建立合作。     

The merger paradox in a mixed oligopoly

This paper examines the set of surplus maximizing mergers in a model of mixed oligopoly. The presence of a welfare maximizing public firm reduces the set of mergers for which two private firms can profitably merge. When a public firm and private firm merge, the changes in welfare and profit depend on the resulting extent of private ownership in the newly merged firm. When the government sets that share to maximize post merger welfare as assumed in the privatization literature, the merger paradox will often remain and the merger will not take place. Yet, we show there always exists scope for mergers that increase profit and increase (if not maximize) welfare. Interestingly, these mergers often include complete privatization.     

Intellectual Property Rights and Entry into a Foreign Market: FDI versus Joint Ventures

We study the effect of the intellectual property rights (IPR) regime of a host country (South) on a multinational's decision between serving a market via greenfield foreign direct investment to avoid the exposure of its technology or a North–South joint venture (JV) with a local firm, which allows R&D spillovers under imperfect IPRs. JV is the equilibrium market structure when R&D intensity is moderate and IPRs strong. The South can gain from increased IPR protection because it encourages a JV, whereas policies to limit foreign ownership in a JV gain importance in technology‐intensive industries as complementary policies to strong IPRs.     

Partial Small Country Import Pass-through,Currency Composition,and Imported Inputs

Long run import pass-through is investigated in a partial equilibrium model in the context of a small domestic economy. Contrary to the standard view, it is shown that long run small country pass-through may be incomplete provided three sufficient conditions are met: (i) the foreign producer uses imported inputs, (ii) those inputs are paid for in a neutral currency, and (iii) three-way arbitrage is in operation. The theoretical predictions of.the partial equilibrium model are tested against the results of recent small country empirical studies. The sensitivity of pass through to productivity changes, monopsonistic behaviour, imperfect competition, the timeframe of the firm. and tariff protection are also examined. [F13]     

Taxation and Capital Structure Choice: The Role of Ownership

Applying firm fixed‐effects estimations to European firm‐level data, I analyze how ownership structure affects the relationship between taxation and capital structure. I find that an increase in the corporate tax rate affects the debt‐to‐assets ratio positively, and that this effect is stronger for firms with concentrated ownership. These results hold independently of whether firms are standalone or subsidiaries, and are also valid if subsidiaries are divided into those that are foreign‐owned and those domestically owned. Lastly, ownership plays a role even when controlling for other potentially important determinants of the relation between corporate taxation and capital structure.     

Core competencies,matching and the structure of foreign direct investment

We develop a matching model of foreign direct investment to study how multinational firms choose between greenfield investment, acquisitions and joint ownership. Firms must invest in a continuum of tasks to bring a product to market. Each firm possesses a core competency in the task space, but the firms are otherwise identical. For acquisitions and joint ownership, a multinational enterprise (MNE) must match with a local partner that may provide complementary expertise within the task space. However, under joint ownership, investment in tasks is shared by multiple owners and, hence, is subject to a holdup problem that varies with contract intensity. In equilibrium, ex ante identical multinationals enter the local matching market, and, ex post, three different types of heterogeneous firms arise. Specifically, the worst matches are forgone and the MNEs invest greenfield; the middle matches operate under joint ownership; and the best matches integrate via full acquisition. We link the firm‐level model to cross‐country and industry predictions and find that a greater share of full acquisitions occur between more proximate markets, in hosts with greater revenue potential and within contract‐intensive industries. Using data on partial and full acquisitions across industries and countries, we find robust support for these predictions.     

Price versus quantity in a mixed duopoly with foreign penetration

We characterize the endogenous competition structure (in prices or quantities) in a differentiated duopoly between a public firm that maximizes domestic welfare and a private firm that can be owned by domestic or foreign investors. The market for which they compete can be domestic or integrated: in the first case Bertrand competition emerges endogenously and in the second case Cournot competition can emerge if the fraction of domestic consumers in the integrated market is low enough. We also determine the optimal degree of foreign penetration showing the optimality of a partial foreign ownership. Finally, we extend the model to increasing marginal cost confirming the robustness of the results.     

Privatization and Strategic Mergers across Borders

We present a theoretical model to capture the role of privatization in the incentives for and implications of cross‐border horizontal mergers. Absent any merger incentives in an autarkic equilibrium, we show that a decrease in the degree of privatization will lower the incentives for diversification of international production. The incentives for diversification for any given degree of privatization will fall when the private and public firms are allowed to move sequentially rather than simultaneously. The presence of the public firm also introduces a new source of asymmetry in the incentives for cross‐border mergers: a reduction in the degree of privatization at home will dampen the potential gains from a take‐over of a home firm by a foreign firm but magnify the potential gains from a take‐over of a foreign firm by a home firm.     

Employee share ownership in a unionised duopoly

Profit sharing schemes have been analysed assuming Cournot competition and decentralised wage negotiations, and it has been found that firms share profits in equilibrium. This paper analyses a different remuneration system: employee share ownership. We find that whether firms choose to share ownership or not depends on both the type of competition in the product market and the way in which workers organise to negotiate wages. If wage setting is decentralised, under duopolistic Cournot competition both firms share ownership. If wage setting is centralised, only one firm shares ownership if the degree to which goods are substitutes takes an intermediate value; otherwise, the two firms share ownership. In this case, if the union sets the same wage for all workers neither firm shares ownership. Therefore, centralised wage setting discourages share ownership. Finally, under Bertrand competition neither firm shares ownership regardless of how workers are organised to negotiate wages.     

Do cost efficiency gap and foreign competitors matter concerning optimal privatization policy at the free entry market?

In this paper, we demonstrate that in contrast to the case with exogenous number of foreign private firms, partial privatization is always the best policy for the public firm in long-run equilibrium, which casts doubt on the robust result in Matsumura and Kanda (J Econ 84(1):27–48, 2005) who argued that welfare-maximizing behavior by the public firm is always optimal in mixed markets. Critical cost gap determines that long-run degree of privatization is larger than the short-run one. In particular, regarding the scenario wherein one public firm competes with domestic private firms and foreign private firms, equilibrium price is lower than marginal cost of public firm instead of being equivalent to marginal cost of the public firm, and that public firm’s outputs, profit, and social welfare is the smallest in the concerned mixed oligopoly models.