TABLE OF CONTENTS Introduction The Argument: Corporate Law as Propelling Diffuse Ownership A. Protecting Minority Stockholders B. The Attractions of a Technical Corporate Law Theory Il. Its limits: Theory… A. Where Law Does not Reach: How Managerial Agency Costs apede Separation B. Improving Corporate Law without Increasing Separation 000 1. The mode 2. An example C. Corporate Law's Limited Capacity to Affect Agency Costs 1. The bu 2. Agency costs: shirking and steal 134467 D. Laws Indirect Effect on Agency Costs F. Precision in Defining Agency Costs and Private Benefits G. Ambiguity in the Legal Theory: Improving it Can Reduce Separatio 9900 1. The offsetting effects. 2. Illustrating the countervailing movement H. The Tight Limits to the Purely Legal Theory IIL. Its Limits: Data A. Measuring Quality 1. Corporate law. what counts 2. Corporate law: the bottom-line B. Data: Nations with Good Corporate Law but Without Separation 1. Market measures of the value of control 2. Dual class common stock 8800037 4. And not-so-rich nations? C. What Beyond Law is Needed for Separation in the Wealthy West 2. Political preconditions D. Data on Explanations Beyond Law Conclusion: The Quality of Corporate Law Argument and its Limits BibliographyTABLE OF CONTENTS Introduction ................................................................................................................... 1 I. The Argument: Corporate Law as Propelling Diffuse Ownership .......................... 6 A. Protecting Minority Stockholders.................................................................. 7 B. The Attractions of a Technical Corporate Law Theory .................................. 9 II. Its Limits: Theory ................................................................................................ 10 A. Where Law Does not Reach: How Managerial Agency Costs Impede Separation....................................................................................... 10 B. Improving Corporate Law without Increasing Separation............................ 10 1. The model........................................................................................... 11 2. An example ......................................................................................... 13 C. Corporate Law’s Limited Capacity to Affect Agency Costs......................... 14 1. The business judgment rule................................................................ 14 2. Agency costs: shirking and stealing................................................... 16 D. Law’s Indirect Effect on Agency Costs........................................................ 17 E. Even if Law Critically Affects Both ............................................................. 19 F. Precision in Defining Agency Costs and Private Benefits............................ 19 G. Ambiguity in the Legal Theory: Improving it Can Reduce Separation......... 20 1. The offsetting effects........................................................................... 20 2. Illustrating the countervailing movement .......................................... 21 H. The Tight Limits to the Purely Legal Theory............................................... 27 III. Its Limits: Data.................................................................................................... 27 A. Measuring Quality....................................................................................... 28 1. Corporate law: what counts? ............................................................ 28 2. Corporate law: the bottom-line.......................................................... 30 B. Data: Nations with Good Corporate Law but Without Separation............... 30 1. Market measures of the value of control ............................................ 30 2. Dual class common stock ................................................................... 33 3. The control block premium................................................................. 37 4. And not-so-rich nations?.................................................................... 41 5. Enforcing contracts............................................................................ 41 C. What Beyond Law is Needed for Separation in the Wealthy West? ............. 42 1. Economic preconditions..................................................................... 42 2. Political preconditions....................................................................... 43 3. Social preconditions........................................................................... 44 D. Data on Explanations Beyond Law ............................................................. 44 Conclusion: The Quality of Corporate Law Argument and its Limits........................... 47 Bibliography ................................................................................................................ 50