We present data on ownership structures of large corporations in 27 wealthy economies, making an effort to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to the Berle and Means image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions or other widely held corporations is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management. * Harvard University. We are grateful to Alexander Aganin, Carlos Berdejo-Izquierdo, David Grossman, Bernardo Lopez-Morton, Tatiana Nenova, Ekaterina Trizlova and David Witkin for help with assembling the data, to Lucian Bebchuk, Marco Becht, Mihir Desai, Oliver Hart, Louis Kaplow, Ren Stulz, Robert Vishny, Luigi Zingales, and two anonymous referees for advice, and to the NSF for financial support. In their 1932 classic, "The Modern Corporation and Private Property," Adolph Berle and Gardiner Means called attention to the prevalence of widely held corporations in the United States, in which ownership of capital was dispersed between small shareholders, yet control was concentrated in the hands of managers. For at least two generations, their book fixed the image of the modern corporation as one run by professional managers unaccountable to shareholders. The book stimulated an enormous "managerialist" literature on the objectives of such managers, including the important work of Baumol (1959), Marris (1964), Penrose (1959), and Williamson (1964), as well as Galbr...

Indicators of the development of the financial sector do not improve monotonically over time. In particular, we find that by most measures, countries were more financially developed in 1913 than in 1980 and only recently have they surpassed their 1913 levels. This pattern cannot be explained by structural theories that attribute cross-country differences in financial development to time-invariant factors, such as a country's legal origin or culture. We propose an "interest group" theory of financial development where incumbents oppose financial development because it breeds competition. The theory predicts that incumbents' opposition will be weaker when an economy allows both cross-border trade and capital flows. This theory can go some way in accounting for the cross-country differences and the time series variation of financial development. When we recognize that different kinds of institutional heritages afford different scope for private interests to express themselves, we obtain a...

This paper develops a model in which the effectiveness of the board's monitoring of the CEO depends on the board's structure or composition. The independence of new directors is determined through a bargaining process between the existing directors and the CEO. The CEO's bargaining position, and thus his influence over the board-selection process, depends on an updated estimate of the CEO's ability based on his prior performance. Many empirical findings about board structure and performance arise as equilibrium phenomena in this model. We also explore the implications of this model for proposed regulations of corporate governance structures.

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We document that ownership by officers and directors of publicly-traded firms is on average higher today than earlier in the century. Managerial ownership rises from 13 percent for the universe of exchange-listed corporations in 1935, the earliest year for which such data exist, to 21 percent in 1995. We examine in detail the robustness of the increase and explore hypotheses to explain it. Higher managerial ownership has not substituted for alternative corporate governance mechanisms. Lower volatility and greater hedging opportunities associated with the development of financial markets appear to be important factors explaining the

We develop a theoretical model to describe and explain variation in corporate governance among advanced capitalist economies, identifying the social relations and institutional arrangements that shape who controls corporations, what interests corporations serve, and the allocation of rights and responsibilities among corporate stakeholders. Our “actor-centered ” institutional approach explains firm-level corporate governance practices in terms of institutional factors that shape how actors’ interests are defined (“socially constructed”) and represented. Our model has strong implications for studying issues of international convergence. Corporate governance concerns “the structure of rights and responsibilities among the parties with a stake in the firm ” (Aoki, 2000: 11). Yet the diversity of practices around the world nearly defies a common definition. Internationalization has sparked policy debates over the transportability of best practices and has fueled academic studies on the prospects of international convergence (Guillén, 2000; Rubach & Sebora, 1998; Thomas & Waring, 1999). What the salient national differences in corporate governance are and how they should best be conceptualized remain hotly debated (Gedajlovic & Shapiro,

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In the last two decades the European financial markets have become more market oriented. We analyze the economic and political forces that have triggered these changes as well as their likely welfare implications. We also try to assess whether this trend will continue. Based on our analysis, we conjecture that even if Europe might benefit from a continuation of the trend, in the near future political support for it is likely to become much weaker. Furthermore, without serious reforms, the trend is likely to benefit Southern Europe less than Northern Europe. *Prepared for the 2 nd ECB Central Banking Conference. We thank Franklin Allen, Philip Hartmann, Rafael Repullo and Martin Hellwig for useful comments and Fang Yu for his help in collecting the data, the Center for Research in Security Prices and the Stigler Center at the University of Chicago for financial support. In the last two decades Europe has experienced a dramatic expansion of financial markets, especially of arm’s length financial markets. But what are the underlying causes of these changes? Are these causes likely to subside in the next few years? Most importantly, will additional movements in this direction be beneficial to the economies of all the E.U. countries? These are the issues we address in this paper.

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