Full Text:   <1268>

CLC number: F224.0

On-line Access: 

Received: 2004-02-02

Revision Accepted: 2004-08-01

Crosschecked: 0000-00-00

Cited: 0

Clicked: 3438

Citations:  Bibtex RefMan EndNote GB/T7714

-   Go to

Article info.
1. Reference List
Open peer comments

Journal of Zhejiang University SCIENCE A 2005 Vol.6 No.4 P.329~333

http://doi.org/10.1631/jzus.2005.A0329


Diversification or splitting-an explanation based on Contract Theory


Author(s):  LUO Liang-zhong, SHI Zhan-zhong

Affiliation(s):  School of Management, Shanghai Jiaotong University, Shanghai 200052, China

Corresponding email(s):   mountaintopsnow@hotmail.com, hilltopnow@163.com

Key Words:  Diversification, Specialization, Divestment, Contract Theory


LUO Liang-zhong, SHI Zhan-zhong. Diversification or splitting-an explanation based on Contract Theory[J]. Journal of Zhejiang University Science A, 2005, 6(4): 329~333.

@article{title="Diversification or splitting-an explanation based on Contract Theory",
author="LUO Liang-zhong, SHI Zhan-zhong",
journal="Journal of Zhejiang University Science A",
volume="6",
number="4",
pages="329~333",
year="2005",
publisher="Zhejiang University Press & Springer",
doi="10.1631/jzus.2005.A0329"
}

%0 Journal Article
%T Diversification or splitting-an explanation based on Contract Theory
%A LUO Liang-zhong
%A SHI Zhan-zhong
%J Journal of Zhejiang University SCIENCE A
%V 6
%N 4
%P 329~333
%@ 1673-565X
%D 2005
%I Zhejiang University Press & Springer
%DOI 10.1631/jzus.2005.A0329

TY - JOUR
T1 - Diversification or splitting-an explanation based on Contract Theory
A1 - LUO Liang-zhong
A1 - SHI Zhan-zhong
J0 - Journal of Zhejiang University Science A
VL - 6
IS - 4
SP - 329
EP - 333
%@ 1673-565X
Y1 - 2005
PB - Zhejiang University Press & Springer
ER -
DOI - 10.1631/jzus.2005.A0329


Abstract: 
By inserting the variable of the exactness of corporate valuation into the classic model of contract Theory, this paper, on the bases of the interaction of the variables of the veraciousness of corporate valuation, managerial incentives and operational risks, explores the deep-seated reasons for changes in corporate structures, and draws the conclusion that the divestment of the subsidiary is beneficial to shareholders when the parent corporate is undervalued and that the relation between the parent and the subsidiary is disordered, or vice versa. This conclusion is consistent with the motives of many divestiture cases in reality.

Darkslateblue:Affiliate; Royal Blue:Author; Turquoise:Article

Reference

[1] Aron, D.J., 1991. Using the capital market as a monitor: corporate spin-offs in an agency framework. RAND Journal of Economics, 22:505-518.

[2] Choi, Y.K., Merville, L.J., 1998. A unified model of corporate acquisitions and divestitures: an incentive perspective. Review of Quantitative Finance and Accounting, 10:127-154.

[3] Fama, E., Jensen, M., 1983. Agency problems and residual claims. Journal of Law and Economics, 26:327-349.

[4] Holmstrom, B., Milgrom, P., 1991. Multitask principal-agent analyses: Incentive contracts, asset ownership, and job design. Journal of Law, Economics and Organization, 7:24-52.

[5] Jensen, M., Meckling, W., 1976. Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3:305-360.

[6] Stiglitz, J., 1986. Theory of Competition, Incentive and Risk. In: Stiglitz, J., Mathewson, G.F. (Eds.), New Developments in the Analysis of Market Structure. MIT Press, Cambridge.

[7] Williamson, O., 1975. Markets and Hierarchies: Analysis and Antitrust Implications. Free Press, New York.

[8] Zhang, W.Y., 1996. Game Theory and Information Economics. Shanghai Sanlian Publishing House and Shanghai People’s Press, Shanghai, China (in Chinese).

Open peer comments: Debate/Discuss/Question/Opinion

<1>

Please provide your name, email address and a comment





Journal of Zhejiang University-SCIENCE, 38 Zheda Road, Hangzhou 310027, China
Tel: +86-571-87952783; E-mail: cjzhang@zju.edu.cn
Copyright © 2000 - Journal of Zhejiang University-SCIENCE