The design of securities

Milton Harris; Artur Raviv

doi:10.1016/0304-405X(89)90048-2

The design of securities

Milton Harris^*, Artur Raviv

^*Corresponding author for this work

Finance

Research output: Contribution to journal › Article › peer-review

67 Scopus citations

Abstract

This paper investigates the determinants of security design. We consider the assignment of both cash flows and voting rights, focusing on corporate control. We postulate that a conflict of interest exists between contestants for control and outside investors. The conflict arises because private benefits of control give contestants an incentive to acquire control even when this reduces firm value. Security design is a tool for resolving these conflicts and maximizing firm value. Our main result is that a single voting security is optimal.

Original language	English (US)
Pages (from-to)	255-287
Number of pages	33
Journal	Journal of Financial Economics
Volume	24
Issue number	2
DOIs	https://doi.org/10.1016/0304-405X(89)90048-2
State	Published - 1989

Funding

*The authors gratefully acknowledge the research support of the National Science Foundation. Professor Harris would also like to thank Dimensional Fund Advisors for financial support. In addition, the current version has benefited from the comments of hard Ruback (the editor), anonymous referee, and Stanford, Berkeley, the Wharton, New York Univ ‘Several attempts have Townsend (1979). (1988), and Zender (1988). T next four models are based markets and transaction ruptcy. None of thes

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/0304-405X(89)90048-2

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author = "Milton Harris and Artur Raviv",

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The design of securities

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