IDEAS home Printed from https://ideas.repec.org/a/bpj/aelcon/v1y2011i1n5.html
   My bibliography  Save this article

The Legal Structure of the Firm

Author

Listed:
  • Robé Jean-Philippe

    (Ecole de Droit de Sciences Po)

Abstract

The notions of firm and corporation are very often confused in the literature on the theory of the firm. In this paper, the two notions are sharply distinguished: the corporation is a legal entity entitled to operate in the legal system and in particular to own assets, to enter into contracts and to incur liabilities. It is used to legally structure firms for numerous reasons, including the need to locate property rights key for the operation of the firm in the ownership of separate, fictitious, legal persons. This avoids ex post-contracting bargaining by parties which otherwise would hold residual control rights over key assets used in the firms operations. The assets partitioning effect of corporate legal personality has also several economizing properties reviewed in the article. The firm is the economic activity developed as a consequence of the cluster of contracts connecting the corporation owning these assets to various holders of resources required in the firms operations. Numerous consequences deriving from this sharp distinction between corporation and firm are explained in this article, including the need to extend the circle of the beneficiaries of the firm managements fiduciary duties.

Suggested Citation

  • Robé Jean-Philippe, 2011. "The Legal Structure of the Firm," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 1(1), pages 1-88, January.
  • Handle: RePEc:bpj:aelcon:v:1:y:2011:i:1:n:5
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/ael.2011.1.1/ael.2011.1.1.1001/ael.2011.1.1.1001.xml?format=INT
    Download Restriction: Download restriction for institutions: For access to full text, subscription to the journal is required. Individual readers who register with De Gruyter Online get free access.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-1158, December.
    2. Jensen, Michael C., 2002. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Business Ethics Quarterly, Cambridge University Press, vol. 12(02), pages 235-256, April.
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    4. Luigi Zingales, 2000. "In Search of New Foundations," Journal of Finance, American Finance Association, vol. 55(4), pages 1623-1653, August.
    5. Richardson, G B, 1972. "The Organisation of Industry," Economic Journal, Royal Economic Society, vol. 82(327), pages 883-896, September.
    6. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    7. Hart, Oliver, 1995. "Corporate Governance: Some Theory and Implications," Economic Journal, Royal Economic Society, vol. 105(430), pages 678-689, May.
    8. Demsetz, Harold, 1988. "The Theory of the Firm Revisited," Journal of Law, Economics, and Organization, Oxford University Press, vol. 4(1), pages 141-161, Spring.
    9. Jean Tirole, 2006. "The Theory of Corporate Finance," Post-Print hal-00173191, HAL.
    10. Kuran, Timur, 2003. "The Islamic Commercial Crisis: Institutional Roots of Economic Underdevelopment in the Middle East," The Journal of Economic History, Cambridge University Press, vol. 63(02), pages 414-446, June.
    11. Geoffrey Hodgson, 2002. "The Legal Nature of the Firm and the Myth of the Firm-Market Hybrid," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(1), pages 37-60.
    12. Searle, John R., 2005. "What is an institution?," Journal of Institutional Economics, Cambridge University Press, vol. 1(01), pages 1-22, June.
    13. Holmstrom, Bengt & Milgrom, Paul, 1991. "Multitask Principal-Agent Analyses: Incentive Contracts, Asset Ownership, and Job Design," Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 24-52, Special I.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:oup:cambje:v:41:y:2017:i:5:p:1505-1523. is not listed on IDEAS
    2. Gindis, David & Hodgson, Geoffrey M. & Huang, Kainan & Pistor, Katharina, 2017. "Legal institutionalism: Capitalism and the constitutive role of lawAuthor-Name: Deakin, Simon," Journal of Comparative Economics, Elsevier, vol. 45(1), pages 188-200.
    3. John Buchanan & Dominic Heesang Chai & Simon Deakin, 2013. "Agency Theory in Practice: A Qualitative Study of Hedge Fund Activism in Japan," Working Papers wp448, Centre for Business Research, University of Cambridge.
    4. Jean-Pierre Bréchet & Pierre-Yves Tougeron, 2015. "De quoi les parties sont-elles prenantes ? L'argument régulationniste," Working Papers hal-01187840, HAL.
    5. Simon Deakin, 2017. "Tony Lawson's Theory of the Corporation: Towards a Social Ontology of Law," Working Papers wp491, Centre for Business Research, University of Cambridge.
    6. Joseph Heath, 2011. "Business Ethics and the ‘End of History’ in Corporate Law," Journal of Business Ethics, Springer, vol. 102(1), pages 5-20, March.
    7. Sandrine Blanc, 2014. "Expanding Workers’ ‘Moral Space’: A Liberal Critique of Corporate Capitalism," Journal of Business Ethics, Springer, vol. 120(4), pages 473-488, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:aelcon:v:1:y:2011:i:1:n:5. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.