Ownership and Objectives of the Firm, and Derivatives
This paper has shown that, first, “the owner of the firmis a misleading word. Just as Robin Hood cannot be termed as the owner of the gang, shareholders of the firm cannot be termed as the owners of the firm. Each resource provider of the firm has property rights only on the resource he provides, i.e., he has an ex-ante choice to join or not to join the firm, and after he invests his resource in the firm, he obtains a right (an option) to ex-post share the big pie generated by the firm. Since unlike public goods, firms always have clear definitions for the resource providers’property rights, and the ex-post wealth of the firm will be distributed to the resource providers according to ex-ante contracts, the so-called first claim of debtholders (or material providers or labor providers) does not have any advantage. Second, as argued by Coase, the size of the firm is determined by the transaction cost of using the price mechanism and the transaction cost of using authority or power, and an activity will be counted as a part of the firm only when it is under the direction of the firm. But power or authority cannot come from the firm’s long-term contracts (as Coase suggested), the monitor’s revising or adding contracts (as Alchian et al. suggested), or owning nonhuman assets (as Alchian et al. and Hart suggested). Power comes from choices (more choices mean more power), and choices come from innovations which can create excess profits to “buy or bribepeople. Third, in the absence of transaction costs, maximizing excess profits of the firm is equivalent to maximizing any resource provider’s wealth (i.e., the Coase theorem: who (or no one) owns the property rights of production (excess profits) is irrelevant to the value of production); the Modigliani-Miller first proposition (i.e., the market value of the firm is independent of the firm’s capital structure) is the Coase theorem when the equityholder owns the property rights of production; and if the labor provider owns the property rights of production, the Modigliani-Miller first proposition can be restated as: the market value of the firm is independent of the firm’s ratio of hired labor’s input to labor-owner’s input, and the Modigliani-Miller second proposition can be restated as: the rate of return on the labor-owner’s input increases with the ratio of hired labor’sinput to labor-owner’s input. Fourth, each resource of the firm is both a European call option and a European put option, and there is no owner of the firm (and no one owns all the assets of the firm). When the firm moves from a more certain project to a more uncertain project, the current market value of equity increases but the current market values of debt, material input and labor input decrease, i.e., there is a wealth redistribution among the resource providers. This result has nothing to do with the resource providers’attitudes toward risk. Each resource of the firm is also a stock plus a forward contract, and Knight’s (1933) claim, that the residual claimant has the power to direct the resource providers who receive fixed payments, does not hold.
transaction costs the Coase theorem ownership property rights authority (power) choices innovation the market value of the firm the Modigliani-Miller propositions derivatives
Kuo-Ping Chang
Department of Quantitative Finance, Tsing Hua University, Kuang Fu Rd., Hsinchu 300, Taiwan
国际会议
昆明
英文
1-22
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）