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The separation of ownership and control in the theory of the firm:A reappraisal

Authors
Journal
International Journal of Industrial Organization
0167-7187
Publisher
Elsevier
Publication Date
Volume
4
Issue
1
Identifiers
DOI: 10.1016/0167-7187(86)90047-0

Abstract

Abstract Managerialists argue that today's large corporations are either owner or manager controlled. This classification is based upon an ex post analysis of shareholdings: if no cohesive group of shareholders possesses more than a fixed percentage of shares the conclusion is that owners do not have control, which is assumed to pass to managers. This paper counters this approach, arguing: (1) causality runs from control to observed shareholdings, and (2) the observed holdings generally suffice to give a subset of owners control. In so doing the paper also confronts and rejects the neoclassical approach.

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