We analyze optimal schemes for privatization of state enterprises when foreign investors are potential buyers. The highest bidders may not be the best large shareholders for the state enterprise, since their bid may only reflect their high private benefit of control. The government finds itself...

This paper highlights the trade-off between the need to restructure a company and the need to provide managers with appropriate incentives to run it after the restructuring. In order to provide incentives, it is optimal to let managers acquire equity in the firm. However, the expectations to be...

The paper studies the role of risk arbitrage in takeover contests. We show that arbitrageurs have an incentive to accumulate non-trivial stakes in a company target of a takeover. For each arbitrageur, the knowledge of his own presence (and that he will tender a positive fraction of his shares)...

We analyze optimal schemes for privatization of state enterprises when foreign investors are potential buyers. The highest bidders may not be the best large shareholders for the state enterprise since their bid may only reflect their high private benefit of control. The government finds itself...