Abstract
We propose that dispersed outside ownership and the resulting managerial discretion come with costs but also with benefits. Even when tight control by shareholders is ex post efficient, 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 conflict with performance-based incentive schemes.
Keywords
ShareholderValue (mathematics)Library scienceManagementCorporate governancePolitical scienceEconomicsComputer science
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Publication Info
- Year
- 1997
- Type
- article
- Volume
- 112
- Issue
- 3
- Pages
- 693-728
- Citations
- 1557
- Access
- Closed
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Cite This
Mike Burkart,
Denis Gromb,
Fausto Panunzi
(1997).
Large Shareholders, Monitoring, and the Value of the Firm.
The Quarterly Journal of Economics
, 112
(3)
, 693-728.
https://doi.org/10.1162/003355397555325
Identifiers
- DOI
- 10.1162/003355397555325