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Conference Paper: R&D financing and the boundary and ownership structure of the firm
| Title | R&D financing and the boundary and ownership structure of the firm |
|---|---|
| Authors | |
| Issue Date | 2005 |
| Publisher | The China Center for Financial Research, Tsinghua University. |
| Citation | 2005 China International Conference in Finance, Kunming, China, 5-7 July 2005. In Proceedings of 2005 China International Conference in Finance, 2005, p. 1-30 How to Cite? |
| Abstract | This paper analyzes the impact of a firm’s external financial environment and the feature
of its investment projects on the firm’s boundary and ownership structure. Our theory
highlights the costs of a full ownership over an asset in destroying the owner’s commitment
capacity. More specifically, if a firm finances a risky R&D project jointly with other
financiers, informational asymmetries and conflicts of interest among co-financiers can be
used as a commitment device to stop a bad project when it is discovered; but such a commitment
would be lost if a firm choose to own and finance a project. Trading the costs of
full ownership with those of a partial ownership through joint financing, which depend on
the external financial environment, large firms in a developed financial environment optimally
choose to a full ownership of less risky R&D projects. In an underdeveloped financial
environment, however, joint ownership is often too costly to be chosen regardless the risk
level of R&D projects. |
| Persistent Identifier | http://hdl.handle.net/10722/153486 |
| DC Field | Value | Language |
|---|---|---|
| dc.contributor.author | Huang, H | - |
| dc.contributor.author | Xu, C | - |
| dc.date.accessioned | 2012-08-07T01:30:18Z | - |
| dc.date.available | 2012-08-07T01:30:18Z | - |
| dc.date.issued | 2005 | - |
| dc.identifier.citation | 2005 China International Conference in Finance, Kunming, China, 5-7 July 2005. In Proceedings of 2005 China International Conference in Finance, 2005, p. 1-30 | - |
| dc.identifier.uri | http://hdl.handle.net/10722/153486 | - |
| dc.description.abstract | This paper analyzes the impact of a firm’s external financial environment and the feature of its investment projects on the firm’s boundary and ownership structure. Our theory highlights the costs of a full ownership over an asset in destroying the owner’s commitment capacity. More specifically, if a firm finances a risky R&D project jointly with other financiers, informational asymmetries and conflicts of interest among co-financiers can be used as a commitment device to stop a bad project when it is discovered; but such a commitment would be lost if a firm choose to own and finance a project. Trading the costs of full ownership with those of a partial ownership through joint financing, which depend on the external financial environment, large firms in a developed financial environment optimally choose to a full ownership of less risky R&D projects. In an underdeveloped financial environment, however, joint ownership is often too costly to be chosen regardless the risk level of R&D projects. | - |
| dc.language | eng | - |
| dc.publisher | The China Center for Financial Research, Tsinghua University. | - |
| dc.relation.ispartof | Proceedings of 2005 China International Conference in Finance | - |
| dc.title | R&D financing and the boundary and ownership structure of the firm | en_US |
| dc.type | Conference_Paper | en_US |
| dc.identifier.email | Xu, C: cgxu@hku.hk | - |
| dc.description.nature | postprint | - |
| dc.identifier.spage | 1 | - |
| dc.identifier.epage | 30 | - |
| dc.publisher.place | China | - |
| dc.description.other | 2005 China International Conference in Finance, Kunming, China, 5-7 July 2005. In Proceedings of 2005 China International Conference in Finance, 2005, p. 1-30 | - |