The Riddle of the Great Pyramids

23 Pages Posted: 13 Apr 2009 Last revised: 30 Jan 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Asian Bureau of Finance and Economic Research

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Date Written: April 2009

Abstract

Large pyramidal family controlled business groups are the predominant form of business organization outside America, Britain, Germany, and Japan. Large pyramidal groups comprising dozens, even hundreds, or listed and unlisted firms place the governance of large swathes of many countries' big business sectors in the hands of a few of their wealthiest families. These structures plausibly substitute for weak market institutions in economies undergoing rapid early-stage industrialization. They may also substitute for weak governments in coordinating Big Push growth programs to establish numerous interdependent simultaneously. However, no such role is evident in developed or in slowly growing developing economies, where such structures appear prone to agency problems and political rent-seeking. If sufficiently large, they may also add to economy volatility by rendering the risk of misgovernance systematic, rather than firm-specific.

Suggested Citation

Morck, Randall K., The Riddle of the Great Pyramids (April 2009). NBER Working Paper No. w14858, Available at SSRN: https://ssrn.com/abstract=1376161

Randall K. Morck (Contact Author)

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