A Survey of Blockholders and Corporate Control
2003; Volume: 9; Issue: 1 Linguagem: Inglês
Autores Tópico(s)
Financial Reporting and Valuation Research
Resumo1. INTRODUCTION The notion of diffuse stock is well entrenched among economists. It started with Adam Smith's legendary warning in Wealth of Nations about negligence and profusion that will result when those who manage enterprises are rather of other people's money than of their own. A century and a half later, another lawyer, Adolf Berle, along with a journalist, Gardiner Means, returned to theme of diffuse stock ownership. Since dawn of capitalism, Berle and Means reasoned, most production had taken place in relatively small organizations in which owners were also managers. Beginning in nineteenth century with Industrial Revolution, however, technological change had increased optimal size of many firms to point where no individual, family, or group of managers would have sufficient wealth to own a controlling interest. As a result, enterprises faced the dissolution of old atom of into its component parts, and beneficial ownership (Berle and Means 1932, p. 8). Ultimately, this of from threatens the very foundation on which economic order of past three centuries has rested. The arguments of Berle and Means on dangers of diffuse stock ownership, written during depths of Great Depression, had an immediate and profound impact. (1) Most notably, their arguments helped to shape federal securities legislation of 1930s. That legislation was intended to protect diffuse shareholders from professional managers, and it remains primary federal securities law to this day. The notion of diffuse has also had a profound influence on contemporary economists. This can perhaps best be seen in one of pivotal papers of postwar era, Jensen and Meckling's (1976) agency paper. Much of focus of that paper is on conflict between diffuse shareholders and professional managers: Since relationship between stockholders and manager of a corporation fit definition of a pure agency relationship, it should be no surprise to discover that issues associated with separation of and control in modern diffuse corporation are intimately associated with general problem of agency. We show ... that an explanation of why and how agency costs generated by corporate form are born leads to a theory of (or capital) structure of firm. As economists started to employ this agency perspective, it was mainly in context of diffuse shareholders and professional managers. This, for example, can be seen in papers in a special issue of Journal of Financial Economics on market for corporate in 1983. Many of these papers have become widely cited. It is illuminating, however, that among sixteen papers in special issue, there is little mention of large-percentage shareholders or managerial stock ownership. (2) In issue's review article (Jensen and Ruback 1983), stock ownership, be it by mangers or by outsiders, was not listed as a direction for future research. After volume was published, researchers began to discover that some public corporations had large-percentage shareholders, many of whom were top managers or directors. Researchers also discovered that some of these corporations were large and well known. Concentrated stock ownership, it appeared, was not limited to a few anomalous firms. Soon, academics began to study impact of large-block shareholders. Three empirical papers in mid-1980s set tone and agenda for much of research into structure that has ensued over following fifteen years. Demsetz and Lehn (1985) address question of types of public corporations that are likely to have high levels of managerial stock ownership. Holderness and Sheehan (1988) address question of whether major corporate decisions are different when a corporation has a large-percentage shareholder. …
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