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The Separation of Corporate Ownership and Control : A Reinterpretation of the Evidence of Berle and Means

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  • Leech, Dennis

Abstract

Berle and Means' classic study of the separation of ownership and control remains authoritative and influential despite having been criticised on various grounds by a number of authors. This paper argues that, firstly, the Berle and Means approach to determining company control implicitly assumes a static framework inappropriate to analysing early twentieth century corporations. Secondly, accepting their approach, their control-type criterion in terms of shareholding concentration is too high and biases their result. Thirdly, the use of the same criterion for all companies fails to recognise the importance of shareholding dispersion and further biases their results. A probabilistic-voting model is described which makes explicit the assumptions behind the concept of factual control. This is applied to the data on 16 companies used by Berle and Means and their classification of them as managerial is shown to be invalid.

Suggested Citation

  • Leech, Dennis, 1984. "The Separation of Corporate Ownership and Control : A Reinterpretation of the Evidence of Berle and Means," The Warwick Economics Research Paper Series (TWERPS) 247, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:247
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    File URL: https://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp247.pdf
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    1. Wilson, Charles A, 1979. "Anticipated Shocks and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 639-647, June.
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    3. Krugman, Paul, 1979. "A Model of Balance-of-Payments Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(3), pages 311-325, August.
    4. Blanchard, Olivier Jean & Kahn, Charles M, 1980. "The Solution of Linear Difference Models under Rational Expectations," Econometrica, Econometric Society, vol. 48(5), pages 1305-1311, July.
    5. Dornbusch, Rudiger & Fischer, Stanley, 1980. "Exchange Rates and the Current Account," American Economic Review, American Economic Association, vol. 70(5), pages 960-971, December.
    6. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    7. Flood, Robert P & Garber, Peter M, 1980. "Market Fundamentals versus Price-Level Bubbles: The First Tests," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 745-770, August.
    8. Olivier Jean Blanchard, 1980. "The Monetary Mechanism in the Light of Rational Expectations," NBER Chapters,in: Rational Expectations and Economic Policy, pages 75-116 National Bureau of Economic Research, Inc.
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