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Rents and Their Corporate Consequences

Mark J. Roe

Harvard Law School

January 2001

Stanford Law Review, Vol. 53, No. 6, 2001
Columbia Law and Economic Working Paper No. 184

Product markets are weaker in some nations than they are in others. Weaker product markets have more monopolies and more monopoly profits, both of which affect politics and corporate governance structures. They affect corporate governance structures directly by increasing managerial agency costs to shareholders, which shareholders then seek to reduce. One would expect corporate governance structures, laws, and practices to differ in nations with monopoly-induced high agency costs from those prevailing in nations with more competition, fewer monopolies, and lower agency costs. The monopoly profits also affect corporate governance structures indirectly by setting up a fertile field for conflict inside the firm as the corporate players - shareholders, managers, and employees - seek to grab those monopoly profits for themselves. And we might speculate that these rents when large enough affect democratic politics and law-making: directly by making monopolists political targets (and political forces); and indirectly as the players inside the firm seek to capture those monopoly profits through political action, with political parties and ideologies (and, in time, laws and standards) that parallel the players' places inside the firm. Data from the industrial organization, finance economics, and political science literature is consistent.

Number of Pages in PDF File: 33

JEL Classification: D21, D4, G30, K22

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Date posted: January 30, 2001 ; Last revised: January 16, 2011

Suggested Citation

Roe, Mark J., Rents and Their Corporate Consequences (January 2001). Stanford Law Review, Vol. 53, No. 6, 2001; Columbia Law and Economic Working Paper No. 184. Available at SSRN: https://ssrn.com/abstract=257633 or http://dx.doi.org/10.2139/ssrn.257633

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Mark J. Roe (Contact Author)
Harvard Law School ( email )
Griswold 502
Cambridge, MA 02138
United States
617-495-8099 (Phone)
617-495-4299 (Fax)
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