Path Dependence or Convergence? The Evolution of Corporate Ownership Around the World
AbstractWe offer a theory that sheds light on the current debate over whether the form of corporate ownership converges to the Berle-Means image. Our analytical results are threefold. First, legal rules and firm-specific protective arrangements are complementary. Secondly, corporate ownership patterns can be convergent or path dependent depending on the relative importance of these protective arrangements. We predict, for example, diffuse stock ownership in countries that impose legal limits on blockholders’ power to expropriate minority investor rights. Thirdly, we find that convergence toward diffuse share ownership is a movement towards the social optimum. Our empirical results suggest a case for the co-existence of path dependence and functional convergence (convergence to the diffuse form of share ownership through cross-listings on U.S. stock exchanges that impose more stringent disclosure and listing requirements). These results have implications for the design of executive compensation, the case for institutional investor activism and the proposal to increase shareholder power.
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Bibliographic InfoPaper provided by University of Waikato, Department of Economics in its series Working Papers in Economics with number 06/07.
Length: 55 pages
Date of creation: 01 Apr 2006
Date of revision:
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corporate governance; ownership concentration; institutions; quality of governance; path dependence; functional convergence;
Other versions of this item:
- Yeh Andrew Jia-Yuh & Lim Steven & Vos Ed, 2007. "Path Dependence or Convergence? The Evolution of Corporate Ownership Around the World," Review of Law & Economics, De Gruyter, vol. 3(2), pages 517-551, December.
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-06-17 (All new papers)
- NEP-BEC-2006-06-17 (Business Economics)
- NEP-CSE-2006-06-17 (Economics of Strategic Management)
- NEP-FIN-2006-06-17 (Finance)
- NEP-PKE-2006-06-17 (Post Keynesian Economics)
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