Study On The Optimal Ownership Arrangement Of The Firm

Theoretical development has achieved extensively unanimous understanding about the contractual nature, the inside structure and the incentive problem of the firm. Because of the diffences of historetical origins, social traditions, and legal systems, however, there exist institutional diffences in corporate governance in various countries, Under these circumstances, there is great theoretical and practical significance for each country?s economy in the 21st century to precisely understand and effectively absorb the latest achievements of global economic theory and practice, to seek the essential connotation of the ownership arrangement of the firm, and to establish good corporate governance suitable to national condition.On account of the contractual nature of the firm, the incompletence of contracts, and the importance of the disposition of power and control stemming from them, the thesis at first establishes the notion of the firm?s ownership in the sense of residual rights on the basis of incomplete contracts, and then analysies the optimal disposition of residual rights among the owners of assets. As the result of the analysis, the real disposition of residual rights is determined by the negotiation among the owners of human capital and nonhuman capital, while the power of their negotiation depends on their asset specifity and relative importance in the firm. Afterwords, at the angles of financing structure and control power market the thesis inspects the relationship between incentive and constraint, cooperation and control in the firm?s contracts. Finally, the thesis logically obstains the institutional conditions of the optimal ownership arrangement of the firm: property rights prerequisite, credit foundation, and legal regulation.