Rethinking Corporate Governance: The Law and Economics of Control Powers

This book takes a comparative law and economics approach to the study of corporate governance. It looks at the overall impact of corporate law on separation of ownership and control across different jurisdictions, taking into account the contributions of economic theory, empirical research, and comparative corporate law to the analysis of corporate governance.This book reappraises the existing framework for economic analysis of corporate law. The standard approach to the legal foundations of corporate governance is based on the 'law matters' thesis, according to which corporate law promotes the separation of ownership and control by protecting minority shareholders from expropriation. Rethinking Corporate Governance takes a broader perspective on the economic and legal determinants of corporate governance. It shows that investor protection is a necessary, but not sufficient, legal condition for efficient separation of ownership and control. Supporting control powers vested in managers or controlling shareholders is at least as important as protecting investors from their abuse. Corporate law does not only matter in the last respect; it matters in both.