Perspectives on La Porta et al’s Corporate Ownership around the World
12 Pages Posted: 24 Nov 2009
Date Written: November 21, 2008
Rafael La Porta, Florencio Lopez-De-Silanes, and Andrei Shleifer conducted a detailed work on Corporate Ownership Around the World, to identify the real shareholders (owners) and how they control firms. La Porta et al reviewed the findings of Adolph Berle and Gardiner Means that corporations in the United States were largely owned by small shareholders and that control is in the hands of professional managers who are not really accountable to the small shareholders (Berle & Means 1932). They (La Porta et al) averred that control is in the hands families or the state.
They found that families and/or for state were the ultimate shareholders, while financial institutions usually had smaller equity control. These families and state also exercise control above their rights by using a form of pyramid structure and by being involved in the firm’s management.
They also discovered exceptions where firms are widely held in economies with good legal protection for minority shareholders.
In the view of this author, the title did not fully represent the scope of the paper. First their work did not cover ownership around the world but selected 27 wealthy economies, excluding Africa. Secondly, the title did not capture the desire of the authors to evaluate the relationship between ownership and control. A title like “Corporate ownership and control in selected wealthy economies of the world” would have been more appropriate.
In this paper, this author will try to critically review this article with a view to highlight its relevance and appropriateness.
Keywords: corporate ownership, corporations, wealthy economies, families, shareholders,control, legal protection
Suggested Citation: Suggested Citation