The separation of ownership and control has always been central in corporate governance debates. A large body of literature has sought to show that control-enhancing arrangements can deter investors. However, the experience of the last few years has suggested that companies with widely dispersed ownership can suffer from their own issues ? not least short-termism.
So, is ownership structure really the dividing line between ?good? and ?bad? governance that many commentators suggest? This short essay suggests that policymakers, academics and practitioners should be careful in deriving conclusions about the most effective ownership and control structures. Ownership is firm-specific and varies across life cycle stages, sectors, regions, countries and cultures. Ownership structures are also dynamic in that they (should) change over time according to evolving markets and shifting business strategies and practices.
Companies with a dual-class structure have increasingly been involved in high-profile battles over the reallocation of control rights. Google, for instance, sought to entrench its founders’ control over the corporation by recapitalizing from a...Read more
Low-quality securities class action lawsuits disproportionally target firms with valuable innovation output and impose a substantial implicit "tax" on these firms. We establish this fact using data on class action lawsuits against U.S....Read more
Regulatory arbitrage refers to structuring activity to take advantage of gaps or differences in regulations or laws. Examples include Facebook modifying its terms and conditions to reduce the exposure of its user data to strict European privacy...Read more
We developed a model under which the allocation of control rights between shareholders and managers (“governance structure”) is irrelevant to firm value. In our model, governance structures affect managers’ incentive to invest, as strong...Read more