Theory of the Firm Theory of the Firm

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Theory of the Firm Theory of the Firm Powered By Docstoc
					Theory of the Firm
Rationales for Establishing Firms
 Input/Output        Efficient scale/technology




Transactions costs       Contracts
               Firm Objectives

• Maximize profits

• Maximize growth

• Maximize sales

• Maximize stock price

• Maximize managers’ income/career path
            Firm Organization

• Vertical integration

• Organization of management

• Functional/divisional separation

• Compensation system
     Forms of Firm Ownership
Sole proprietorship   Partnership
               Forms of Firm Ownership
                         Corporation




Companies whose capital is divided into shares that are owned by individuals
who have limited responsibility for the debts of the company.
                    Corporations
• Benefits
• Costs
• Objectives



• Conflicts


              Separation of ownership from control


• Expected returns to stockholders > bondholders

				
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posted:9/30/2011
language:English
pages:7