In recent years, there has been a surge in academic interest in the ownership"of corporations, and in the links between ownership and performance. The interest in this issue is driven by rapid changes going on in international capital markets, as well as in the corporate sector in many countries A substantial part of this recent literature regards owning shares of stock in a corporation as if owning shares were the same thing as"owning the issuing corporation itself. This essay considers the ideas of ownership, and of "property rights "as they apply to the corporate context Just as the idea of private property has been central to our understanding of the workings of of the firm and corporate governance in the last twenty years. Professor Oliver Hart, individuallyany capitalist economies, the idea of ownership" has been a key idea in much of the literature on the theo together with various coauthors, advanced our understanding of the role of property rights "in the theory of the firm by suggesting that" property rights should be understood as a mechanism for closing gaps in incomplete contracts. By this theory, the economic significance of "ownership"is that property ights have the effect of assigning to the"owner of an asset the right to make all of the decisions about the use of the asset, except those assigned by law or contract to someone else. In other words, the owner gets the"residual rights of control Furthermore, by this theory, economic decisions about the use of an asset made by the"owner are likely to be optimal because the residual right of control is bundled with the right to receive the residual income as well as the responsibility to bear the residual risk associated with the asset The theoretical work on property rights as a mechanism for closing gaps in contracts forms the basis for an additional literature in which property rights over assets define a firm, or at least, define the boundaries of the firm. This essay argues that, despite all this emphasis on"ownership rights"and their supposed importance in corporations, ownership of corporations is not a well-defined concept When a corporation is formed, a separate legal entity is created, and the corporation itself becomes the"owner" of the assets put into the corporation by the initial investors. The corporation subsequently has the residual income rights and the residual rights of control over those assets, as well as over the output from production, and over any further assets purchased by the firm. a central leg fact of the corporate form of organizatio, is that, once a corporation has been formed, and assets I See, e.g., Grossman and Hart(1986)p 691; Hart and Moore(1990)p. 1119 Hart(1988) p. 119; and Hart(1989)p. 1757 The corporate form emerged in the Middle Ages in Europe as a mechanism by which property could be held more or less in perpetuity by churches, monasteries, universities, municipalities, and eleemosynary institutions such as hospitals. The idea was to separate control rights from conveyance rights, so that a bishop, for example, could acquire or sell property for the church, but could not convey that property to his heirs1 See, e.g., Grossman and Hart (1986) p. 691; Hart and Moore (1990) p. 1119; Hart (1988) p. 119; and Hart (1989) p. 1757. 2 The corporate form emerged in the Middle Ages in Europe as a mechanism by which property could be held more or less in perpetuity by churches, monasteries, universities, municipalities, and eleemosynary institutions such as hospitals. The idea was to separate control rights from conveyance rights, so that a bishop, for example, could acquire or sell property for the church, but could not convey that property to his heirs. 2 In recent years, there has been a surge in academic interest in the “ownership” of corporations, and in the links between ownership and performance. The interest in this issue is driven by rapid changes going on in international capital markets, as well as in the corporate sector in many countries. A substantial part of this recent literature regards owning shares of stock in a corporation as if owning shares were the same thing as “owning” the issuing corporation itself. This essay considers the ideas of “ownership”, and of “property rights” as they apply to the corporate context. Just as the idea of private property has been central to our understanding of the workings of capitalist economies, the idea of “ownership” has been a key idea in much of the literature on the theory of the firm and corporate governance in the last twenty years. Professor Oliver Hart, individually and together with various coauthors, advanced our understanding of the role of “property rights” in the theory of the firm by suggesting that “property rights” should be understood as a mechanism for closing gaps in incomplete contracts.1 By this theory, the economic significance of “ownership” is that property rights have the effect of assigning to the “owner” of an asset the right to make all of the decisions about the use of the asset, except those assigned by law or contract to someone else. In other words, the “owner” gets the “residual rights of control”. Furthermore, by this theory, economic decisions about the use of an asset made by the “owner” are likely to be optimal because the residual right of control is bundled with the right to receive the residual income as well as the responsibility to bear the residual risk associated with the asset. The theoretical work on property rights as a mechanism for closing gaps in contracts forms the basis for an additional literature in which property rights over assets define a firm, or at least, define the boundaries of the firm. This essay argues that, despite all this emphasis on “ownership rights” and their supposed importance in corporations, ownership of corporations is not a well-defined concept. When a corporation is formed, a separate legal entity is created, and the corporation itself becomes the “owner” of the assets put into the corporation by the initial investors. The corporation subsequently has the residual income rights and the residual rights of control over those assets, as well as over the output from production, and over any further assets purchased by the firm. A central legal fact of the corporate form of organization2 , is that, once a corporation has been formed, and assets