TY - JOUR
T1 - The design of securities
AU - Harris, Milton
AU - Raviv, Artur
N1 - Funding Information:
*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
PY - 1989
Y1 - 1989
N2 - 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.
AB - 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.
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U2 - 10.1016/0304-405X(89)90048-2
DO - 10.1016/0304-405X(89)90048-2
M3 - Article
AN - SCOPUS:45249127077
SN - 0304-405X
VL - 24
SP - 255
EP - 287
JO - Journal of Financial Economics
JF - Journal of Financial Economics
IS - 2
ER -