Ownership Structure, Profit Maximization, And Competitive Behavior

Date Added: Jul 2009
Format: PDF

The authors question the broad applicability of the assumption of profit maximization as the goal of the firm and investigate how variance in objective functions across different ownership structures affects competitive behavior. While prior work in agency theory has argued that firms may fail to engage in profit maximizing behaviors due to misalignment between the goals of owners and managers, they contend that they are unlikely to observe pure profit maximizing behavior even in the case of the perfect alignment of goals that exists in ownermanaged firms.