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- Title
Equity Participation in International Joint Ventures.
- Authors
Ramamohan Rao, T. V. S.; Sharma, Ruchi
- Abstract
International joint ventures are subject to moral hazard and instability. Low IPR protection and/or inadequate enforcement account for such problems. Principal-agent models account for the moral hazard in terms of the randomness in revenue generated. Equity sharing arrangements, that have important commitment and control effects, can be expected to eliminate the moral hazard and produce royalty arrangements consistent with empirically observed stylized facts. This study demonstrates that the change in the variance is the primary channel through which the commitment and control effects affect the choice of such royalty payments.
- Subjects
JOINT ventures; EQUITY (Law); INVESTMENTS; RISK management in business; BUSINESS partnerships; PAYMENT
- Publication
Decision (0304-0941), 2006, Vol 33, Issue 1, p1
- ISSN
0304-0941
- Publication type
Article