The International Journal of Business & Management

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I apply the theory of incomplete contract, focus on the residual control rights and the residual claims of state-owned enterprises allocation, take asset-specific investment as the main line of paper, propose the special constrains of incomplete contract theory while applying on China, that is, develop and enrich the connotation and denotation of Incomplete Contract Theory. The paper builds a general mathematical model based on the modified theory of incomplete contract and takes the data of Tianjin Dredging Company(TDC) into empirical analysis, and obtains the sub-optimal solutions of residual control rights and residual claims allocation under constraint of China reality, the paper argues that the government should continue to hold on the shares of TDC, but should give the managers more residual control rights and residual claims so as to accelerate enterprise incentive mechanism and improve production efficiency.(JEL  D86)


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