The Determinants of Ownership and Control: Current Theories
This chapter outlines the leading theories that have been advanced in the comparative corporate governance literature to account for why patterns of ownership and control differ across borders and shows that they have limited explanatory power in the British context. Due to managerial ‘agency costs’ the economic pre-dominance of the widely held company is not pre-ordained. The ‘law matters’ thesis implies that ‘tough’ company law can prompt a divorce between ownership and control but UK company law was not highly protective of shareholders as ownership separated from control. ‘Trust’ is an insufficiently precise analytical concept to offer much assistance in explaining the configuration of share ownership in the UK. Theories concerning the regulation of financial institutions, politics and ‘legal origins’ (the legal family to which a country belongs) similarly lack substantial explanatory power and analyzing what happened in terms of path dependence generally obscures more than it reveals.
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