Reference : State‐owned firms and private debt
Scientific journals : Article
Business & economic sciences : Microeconomics
http://hdl.handle.net/10993/38553
State‐owned firms and private debt
English
Picard, Pierre M mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
rusli, ridwan [Technische Hochschule Koln > > > Ass Prof]
20-Apr-2018
Journal of Public Economic Theory
Blackwell
20
5
672-702
Yes (verified by ORBilu)
International
1097-3923
[en] State-owned firms ; debt ; privatization
[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
http://hdl.handle.net/10993/38553

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