Institute for Research on Collective Goods
Finance, Control, and Efficiency in Firms
SFB TR 15
B3
General Research Questions
 What are the efficiency
implications of availability of
funds?
 How is the answer to this question
affected by different modes of
governance?
Applications
 Free Cash Flow, Retained Earnings and the
Allocation of Funds for Investment
 Cross-Subsidization in Public and Private
corporations (Hellwig JPubE 2007)
 Subsidization of Activities from General Tax
Revenue (Hellwig 2004/8 Econometrica RfR)
 Interaction of Distributive and Allocative
Concerns (Hellwig 2004/8 Econometrica RfR,
Bierbrauer JPET 2009, JPubE 2009)
Incentive Issues
 Privatization and regulation as a governance
mechanism (Bierbrauer 2010)
 Private governance as an incentive mechanism
 Credibility problems associated with private
governance and self-finance.
Contracting Issues
 Government regulation versus public
management as an variation of complete
versus incomplete contracting
 Vertical integration in three-layer
organizations: The tradeoff between vertical
integration upstream and vertical integration
downstream (Federal Government/Deutsche
Bahn Rail/ Deutsche Bahn Transportation)
The Financial Crisis
 Analyses of the Financial Crises and Reform
(Hellwig De Economist 2009)
 Can No-Bailout Policies be made credible?
 What are Suitable Mechanisms for containing
moral hazard in banks? (Admati, DeMarzo,
Hellwig, Pfleiderer 2010)
Debt as Discipline?
 Calomiris etc.: Debt finance disciplines banks.
Therefore, 95 % debt finance is not a cause
for worry.
 Calomiris-Kahn (1991): Debt holders invest in
information, run on the bank if they see
something bad.
 This prevents misfeats.
 It also discourages bad behaviour (Excessive
risk taking)
Research Questions
 How does the tradeoff between the free-rider effect and
the redistribution effect of information collection work?
 Is there a tradeoff between incentives for information
acquisition and information use?
 Could the use of short-term (demandable) debt be
explained by overconfidence effects?
 Could the extensive use of debt finance be explained as
excessive risk taking in a world with insufficient
commitments rather than optimal contracts?
 What happens to the Calomiris story if there is equity as
well as debt? Would debt holders invest in information?
Or would the look at the stock price?