Since 1973 technological, political, regulatory, and economic forces have been changing the worldwide economy in a fashion comparable to the changes experienced during the nineteenth century Industrial Revolution. As in the nineteenth century, we are experiencing declining costs, increaing average (but decreasing marginal) productivity of labor, reduced growth rates of labor income, excess capacity, and the requirement for downsizing and exit. The last two decades indicate corporate internal control systems have failed to deal effectively with these changes, especially slow growth and the requirement for exit. The next several decades pose a major challenge for Western firms and political systems as these forces continue to work their way through the worldwide economy. © M. C. Jensen, 1993

The valuation effect of diversification is examined for large samples of firms in

We propose that dispersed outside ownership and the resulting managerial discretion come with costs but also with bene�ts. Even when tight control by shareholders is ex post ef�cient, it constitutes ex ante an expropriation threat that reduces managerial initiative and noncontractible investments. In addition, we show that equity implements state contingent control, a feature usually associated with debt. Finally, we demonstrate that monitoring, and hence ownership concentration, may con�ict with performance-based incentive schemes. I.

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This paper uses clinical evidence to show how the German system of corporate control and governance is both more active and more hostile than has previously been suggested. It provides a complete breakdown of ownership and takeover defence patterns in German listed companies and finds highly fragmented (but not dispersed) ownership in non-majority controlled firms. We document how the accumulation of hostile stakes can be used to gain control of target companies given these ownership patterns. The paper also suggests an important role for banks in helping predators accumulate, and avoid the disclosure of, large stakes.

This study examines the characteristics of corporate boards for 82 companies that attempted 106 acquisitions during the 1980s. We find that poor performance is more likely to occur in firms that have recently experienced higher turnover of outside and lower turnover of inside directors. Companies with smaller boards, more reputable members, and larger equity holdings also outperform their counterparts. Our results do not suggest that more outside directors lead to improved performance but that outsiders often resign from the board instead of challenging managerial shirking. We conclude that choosing directors for whom board exit is costly will better reduce agency costs. The authors would like to thank Mark Mitchell, Harold Mulherin, Anil Shivdasani, Michael Weisbach, seminar participants at the University of Chicago, and the 1996 Southern Economics Association Meetings for comments and suggestions. The usual disclaimer applies.

This paper is a product of the Financial Sector Development Department. It is a slightly revised version of a paper presented at the Conference on Corporate Governance in Central Europe and Russia, December 15-16, 1994, organized by the World Bank and the Central European University Privatization Project. Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Priscilla Infante, room G8-118, extension 37642 (50 pages). May 1995

The effect of changes in ownership structure on performance: Evidence from the thrift industry *

An earlier version of this manuscript was circulated as “A Theory of the Choice between Concentrated and

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