The Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications

TLDR

Corporate ownership is highly concentrated worldwide, but Anglo‑American firms exhibit dispersed ownership, a pattern historically attributed to political constraints and, more recently, to legal systems that protect minority shareholders. The study seeks to explain the national boundaries between dispersed and concentrated ownership structures. Survey data reveal that common‑law regimes outperform civil‑law regimes in fostering equity markets, supporting a legal hypothesis that strong minority‑shareholder protections sustain active equity markets.

Abstract

Comparative research has shown that, even at the level of the largest firms, corporate ownership structure tends to be highly concentrated, with dispersed ownership structures characterizing only the Anglo/American context. What explains these national boundaries between dispersed and concentrated ownership structures? Earlier in this decade, several authors (most notably, Mark Roe) proposed "political" theories of corporate finance under which dispersed ownership was viewed as largely the result (in the U.S.) of regulatory constraints imposed on the development of financial intermediaries. Under this view, a deep-rooted American political ideology disfavored concentrated financial power, with the alleged result that the Berle/Means model of the firm (with its characteristic "separation of ownership and control") became dominant in the U.S. (but not elsewhere). More recently, economists working on the privatization of transitional economies have focused on the difficulties in establishing viable securities markets. Based on survey data, they have concluded that common law regimes vastly outperform civil law regimes in fostering the development of equity markets. Even if this research is still at a preliminary stage, this data suggests an alternative "legal" hypothesis for the observed dichotomy between concentrated and dispersed ownership: namely, only those legal systems that provide significant protections for minority shareholders can sustain active equity markets.