Growth versus profit‐maximization: A simultaneous‐equations approach to testing the marris model

Abstract

Abstract This paper adopts a new approach to the empirical testing of the Marris managerial theory of the firm and applies it to a cross‐section sample of British companies in the early 1970s. It introduces three important innovations in the direct testing of the model: (i) a new exposition of the Marris theory if presented leading to a specification of the model as a simultaneous system; (ii) ownership control is measured as a continuous variable; (iii) the location of control is identified as an important dimension in the analysis. Preliminary estimates cast doubt on some important assumptions of the Marris theory.