Notes0505讲座1产业组织2016.pdfVIP

Topic One: firm; cost • Different ownership form and the importance of each form – Proprietorship (single owner) – Partnerships (multiple owners) – Corporations. • Limited liability – Sole proprietors and partners are ally liable for the debts of their business. All the owners’assets, not just those invested in the business, are at risk. – In U.S. 87 percent of business sales are made by corporations, even though only 20 percent of all firms are corporations. – Corporations are companies whose capital is divided into share that are held by individuals who have only limited responsibility for the debts of the . That is, a shareholder has limited liability. If the corporation fails, ( is unable to pay is bills, the shareholders need not pay for the debt using their al assets. A shareholder’s loss is limited to the price paid for the stock. – The rise of the corporation co ide with the need to rease the size of firms. Key Parties in a Firm and Their Utility • Shareholders elect a board of directors to run the corporation. • Th delegates the day to day responsibility to officers of the . • The stocks are not concentrated in the hands of a few key employees. • Once stock is issued, the corporation receives nothing when individuals buy or sell the shares on a stock market. • Shareholders: dividend and the price appreciation • Corporations also raise money by issuing debt. The promise to pay those who lend them money (debt holders) a stipulated amount of interest plus repayment of the loan. • Debt holders are paid first, stock holders are paid from what remains. Separation of ownership and control • Agency issue: In many corporations, there is often no single shareholder with the