Political and Legal Restraints on Ownership and Control of Public Companies

37 Pages Posted: 2 Jul 2019

Date Written: May 1990

Abstract

Law and politics affect the financial structure of the public corporation, perhaps as much as economics. Law restricts financial institutions from holding large equity blocks and from networking the small blocks they do own. Impetus for these restrictions came from several sources: a public-spirited belief that financial stability would be fostered by financial fragmentation, American federalism (each state created its own insular set of financial institutions), rivalries between groups of financial institutions, and popular mistrust of powerful private financial institutions. The stability of many of these rules also derives from the political resistance that one would expect corporate managers and benefited financial institutions to offer to any change.

Keywords: Berle-Means; public corporation; strong managers; weak owners; populism; Glass-Steagall

Suggested Citation

Roe, Mark J., Political and Legal Restraints on Ownership and Control of Public Companies (May 1990). Journal of Financial Economics (JFE), Vol. 27, 1990. Available at SSRN: https://ssrn.com/abstract=2958990 or http://dx.doi.org/10.2139/ssrn.2958990

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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