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Cover von: Monitoring and Productive Efficiency in Public and Private Firms
Anke S. Kessler, Christoph Lülfesmann

Monitoring and Productive Efficiency in Public and Private Firms

Rubrik: Articles
Jahrgang 58 (2002) / Heft 2, S. 167-187 (21)
Publiziert 09.07.2018
DOI 10.1628/0015221022905713
Veröffentlicht auf Englisch.
inkl. gesetzl. MwSt.
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The paper compares productive efficiency in public and private firms. We study a principal-agent model in which the firm's manager is privately informed about a cost parameter and exerts unobservable cost reducing effort, while the owner can conduct costly audits to obtain information about the firm's cost. Without auditing, managerial effort (and therefore production efficiency) is strictly higher under public governance with a benevolent government. However, if auditing is possible, a profit-maximizing private owner always audits at least as frequently as a public principal. For small auditing costs, we find that monitoring decisions, managerial effort and welfare under both governance structures coincide. Conversely, when audits becomes more expensive, the public (but not the private) owner refrains from monitoring, and the private firm may produce more cost efficiently.