Reference : State owned firms: private debt, cost revelation and welfare. Journal of Public Econo...
Scientific journals : Article
Business & economic sciences : Microeconomics
Finance
http://hdl.handle.net/10993/38053
State owned firms: private debt, cost revelation and welfare. Journal of Public Economic Theory.
English
Picard, Pierre mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) > > CREA]
Rusli, Ridwan []
2018
Journal of Public Economic Theory
Blackwell
Yes (verified by ORBilu)
International
1097-3923
1467-9779
Oxford
United Kingdom
[en] State owned firms ; Debt
[en] We study the role of private debt financing in reducing government transfers and information costs in a state‐owned firm. We show that debt contracts allow the government to reduce socially costly subsidies by letting underperforming state‐owned firms default. When the firm has private information, the government uses debt to reduce the firm's information rents. The option of default and privatization allows the government to stop subsidizing the firm. We identify the conditions under which information costs outweigh privatization costs and a positive debt level benefits governments.
Researchers ; Professionals ; Students ; General public
http://hdl.handle.net/10993/38053

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