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The Political Roots Of American Corporate Finance

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  • Mark J. Roe

Abstract

The distinctive ownership and governance structure of the large American corporation-with its distant shareholders, a board of directors that defers to the CEO, and a powerful, centralized management-is usually seen as a natural economic outcome of technological requirements for large-scale enterprises and substantial amounts of outside capital, most of which had to come from well-diversified shareholders. Roe argues that current U.S. corporate structures are the result not only of such economic factors, but of political forces that restricted the size and activities of U.S. commercial banks and other financial intermediaries. Populist fears of concentrated economic power, interest group maneuvering, and a federalist American political structure all had a role in pressuring Congress to fragment U.S. financial institutions and limit their ability to own stock and participate in corporate governance. 1997 Morgan Stanley.

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  • Mark J. Roe, 1997. "The Political Roots Of American Corporate Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(4), pages 8-22.
  • Handle: RePEc:bla:jacrfn:v:9:y:1997:i:4:p:8-22
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