Privatization and Leverage

This article studies privatization methods when potential buyers can lever up strategically to maximize their probability of winning. We endogenize the optimal fraction of shares to be auctioned off when privatizing a company. There is a close correlation between the optimal fraction of shares to be...

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Veröffentlicht in:Journal of law, economics, & organization economics, & organization, 2012-04, Vol.28 (1), p.32-44
Hauptverfasser: At, Christian, Morand, Pierre-Henri
Format: Artikel
Sprache:eng
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Zusammenfassung:This article studies privatization methods when potential buyers can lever up strategically to maximize their probability of winning. We endogenize the optimal fraction of shares to be auctioned off when privatizing a company. There is a close correlation between the optimal fraction of shares to be sold off and the auction winner's debt level and hence the risk of bankruptcy.
ISSN:8756-6222
1465-7341
DOI:10.1093/jleo/ewp028