CORPORATE-CONTROL AND THE MARKET FOR MANAGERIAL LABOR - ON THE DECISION TO GO PUBLIC

This paper analyses some of the tradeoffs involved in the decision to go public. The main point is that entrepreneurs go public in order to fund larger projects, but lose discretion over decisions by becoming a ccountable to outside investors. The analysis focuses on succession an d recruiting problems and assumes that the major source of private ben efits of control is connected with investments in human capital, Firms ' control structure influences their decision to search for new manage rs. This creates an externality between firms and equilibria can be Pa reto ranked, such that the emergence of a superior control structure f or all firms is inhibited by coordination failure.