This dissertation reappraises the existing framework for economic analysis of corporate law. The standard approach to the legal foundations of corporate governance is based on the ‘law matters’ thesis, according to which corporate law promotes separation of ownership and control by protecting minority shareholders from expropriation. This book takes a broader perspective on the economic and legal determinants of corporate governance. It shows that investor protection is a necessary, but not sufficient, legal condition for efficient separation of ownership and control. Supporting control powers vested in managers or controlling shareholders is at least as important as protecting investors from their abuse. Corporate law does not only matter in the last respect; it matters in both. This result is derived by interpreting corporate governance based on three categories of private benefits of control. Corporate law affects corporate governance depending on its impact on each category of private benefits, and not just on those accounting for shareholder expropriation. Three major areas of corporate law are considered with this view. The first is the legal distribution of corporate powers. The second is the discipline of related-party transactions. The third is regulation of control transactions. The three areas are investigated comparatively in the US, the UK, Italy, Sweden, and the Netherlands. The investigation shows that, when corporate law is analyzed in this fashion, it explains the different patterns and performance of corporate governance. This account of corporate law is not only useful for understanding separation of ownership and control, but also for indicating how to improve its efficiency through legal intervention.

Additional Metadata
Keywords Law and Finance, agency costs, board of directors, class action, comparative corporate governance, control premium, corporate control, distribution of powers, entrepreneurship, false positives vs. false negatives, free riding, general meeting of shareholders, incomplete contracts, independent directors, looting, mandatory bid, nexus of contracts, one-share one-vote, ownership structure, pressure to tender, private benefits of control, sale of control, self-dealing, severance payment, shareholder suit, squeeze-out, takeover defenses, takeover directive, takeovers, tender offer
JEL Mergers; Acquisitions; Restructuring; Corporate Governance (jel G34), Corporation and Securities Law (jel K22), Illegal Behavior and the Enforcement of Law (jel K42), Entrepreneurship (jel L26), Financial Markets; Saving and Capital Investment (jel O16)
Promotor R.J. van den Bergh (Roger)
Publisher Erasmus University Rotterdam
Sponsor Bergh, Prof. Dr. R.J. van den (promotor)
ISBN 978-90-8559-351-5
Persistent URL hdl.handle.net/1765/10907
Citation
Pacces, A.M. (2008, January 24). Featuring Control Power: Corporate Law and Economics Revisited. Erasmus University Rotterdam. Retrieved from http://hdl.handle.net/1765/10907