Ernst Freund as Precursor of the Rational Study of Corporate Law

Journal of Institutional Economics, Forthcoming

42 Pages Posted: 26 Jan 2017 Last revised: 7 Nov 2017

See all articles by David Gindis

David Gindis

University of Warwick - Warwick Law School

Date Written: October 27, 2017


The rise of large business corporations in the late nineteenth century compelled many American observers to admit that the nature of the corporation had yet to be understood. Published in this context, Ernst Freund’s (1897) little-known The Legal Nature of Corporations was an original attempt to come to terms a new legal and economic reality. But it can also be described, to paraphrase Oliver Wendell Holmes, as the earliest example of the rational study of corporate law. The paper shows that Freund had the intuitions of an institutional economist, and engaged in what today would be called comparative institutional analysis. Remarkably, his argument that the corporate form secures property against insider defection and against outsiders anticipated recent work on entity shielding and capital lock-in, and can be read as an early contribution to what today would be called the theory of the firm.

Keywords: Ernst Freund, corporate theory, rational study of corporate law, comparative institutional analysis, entity shielding, capital lock-in, theory of the firm

JEL Classification: B31, D23, K22

Suggested Citation

Gindis, David, Ernst Freund as Precursor of the Rational Study of Corporate Law (October 27, 2017). Journal of Institutional Economics, Forthcoming, Available at SSRN: or

David Gindis (Contact Author)

University of Warwick - Warwick Law School ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
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