Miscellaneous Organizational Links
16 July 2010 at 12:22 am Peter G. Klein 3 comments
| Peter Klein |
- The much-anticipated KKR IPO turned out to be a snoozer. But what the heck is a publicly traded private-equity firm anyway?
- Is the flattening hierarchy an illusion, driven by job-title inflation?
- How call centers use behavioral economics.
- Belén Villalonga’s new paper on ownership concentration and internal-capital-market efficiency — highly recommended.
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Entry filed under: Corporate Governance, Ephemera, Financial Markets, Management Theory, Strategic Management, Theory of the Firm.
Organizations and Markets 
1.
Avi | 16 July 2010 at 2:19 pm
Prof. Klein,
I am curious to know your views on the first one ( what the heck is a publicly traded private-equity firm anyway)
Especially in view of this –
Michael Jensen (the father of agency cost theory) said that Schwarzman has created a massive negative externality for other PE firms (by taking BlackStone public). See the link below.
http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1117866_code9.pdf?abstractid=963530
http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1117866_code9.pdf?abstractid=963530&rulid=245853&mirid=1
Avi
2.
k | 16 July 2010 at 5:59 pm
I work in a Legal Philosophy Institute. It was established in 1974. Here w have 4 Institutes no one in law even we work in a Law School. At the time there were 6 members. 5 prima donnas and the jealous wife on one of them. So there was a Director and 5 section chiefs, So there were to Muchos caciques y ningun indio,( how that expression survives the tough police?). Currently of the non retired members only two out of 14 members dont boast of a title., there are now subsections with their chiefs.
So the reason could be only ego massaging
3.
Peter Klein | 17 July 2010 at 11:01 pm
Avi, at first glance, I agree with Jensen — the idea of taking one of those firms public, when their privateness, and consequent protection from public (and regulatory) scrutiny, is a main part of their competitive advantage — makes little sense. OTOH, diversified LBO associations are very much like conglomerate, even when they remain private, as noted in a well-known (though strangely unpublished) paper by Baker and Montgomery (http://www.hbs.edu/research/pdf/10-024.pdf). One difference between LBO associations and publicly traded conglomerates is that the former are unable to shift cash flows among portfolio companies (due to legal restrictions associated with raising funds). Perhaps raising some funds through public equity markets allows firms like KKR to combine some of the best features of private equity with some of the internal-capital-market advantages of diversified public companies — a new kind of hybrid organization, in other words. But I’m just speculating.