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The 'Ignored' Third Dimension of Corporate Governance

European Corporate Governance Institute (ECGI) - Law Working Paper No. 235/2014

Lex Research Topics in Corporate Law & Economics Working Paper No. 2014-1

16 Pages Posted: 6 Jan 2014 Last revised: 24 Jan 2014

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC); Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Erik P. M. Vermeulen

Tilburg University - Department of Business Law; Philips Lighting - Legal Department; Tilburg Law and Economics Center (TILEC); Kyushu University - Graduate School of Law

Date Written: January 5, 2014

Abstract

The separation of ownership and control has always been central in corporate governance debates. A large body of literature has sought to show that control-enhancing arrangements can deter investors. However, the experience of the last few years has suggested that companies with widely dispersed ownership can suffer from their own issues – not least short-termism. So, is ownership structure really the dividing line between ‘good’ and ‘bad’ governance that many commentators suggest? This short essay suggests that policymakers, academics and practitioners should be careful in deriving conclusions about the most effective ownership and control structures. Ownership is firm-specific and varies across life cycle stages, sectors, regions, countries and cultures. Ownership structures are also dynamic in that they (should) change over time according to evolving markets and shifting business strategies and practices.

Keywords: controlling ownership, corporate governance, innovation, investor relations, shareholder value, widely dispersed ownership

JEL Classification: G01, G34, K20, K22, L22, L25, O16

Suggested Citation

McCahery, Joseph A. and Vermeulen, Erik P. M., The 'Ignored' Third Dimension of Corporate Governance (January 5, 2014). European Corporate Governance Institute (ECGI) - Law Working Paper No. 235/2014; Lex Research Topics in Corporate Law & Economics Working Paper No. 2014-1. Available at SSRN: https://ssrn.com/abstract=2374810 or http://dx.doi.org/10.2139/ssrn.2374810

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31-(0)13-466-2306 (Phone)
+31-(0)13-466-2323 (Fax)

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Erik P.M. Vermeulen (Contact Author)

Kyushu University - Graduate School of Law ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

Tilburg University - Department of Business Law ( email )

Philips Lighting - Legal Department ( email )

Amstelplein 2
Amsterdam
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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