Corporate Ownership Around the World¶
Why this mattered¶
Before this paper, the dominant reference point for thinking about large corporations was still the Berle-Means corporation: dispersed shareholders, professional managers, and an agency problem between owners and managers. La Porta, López-de-Silanes, and Shleifer showed that this was not the typical global pattern. By tracing ultimate control rather than stopping at direct shareholdings, they made visible a different corporate world: large firms in many wealthy economies were commonly controlled by families or the state, and controlling shareholders often held voting power far above their cash-flow ownership through pyramids, cross-holdings, and managerial participation.
The paradigm shift was methodological as well as conceptual. The paper turned corporate ownership into a comparable, cross-country empirical object. After it, researchers could ask not only whether firms were “widely held,” but who ultimately controlled them, how control was separated from economic ownership, and how legal institutions shaped that structure. This made it possible to connect corporate governance to investor protection, capital market development, private benefits of control, tunneling, family business groups, and state capitalism in a unified empirical framework.
Its influence also came from undermining the idea that modern financial development naturally converges on dispersed ownership. Instead, the paper helped establish that legal rules and political-economic institutions condition the basic architecture of capitalism. Later work on law and finance, corporate governance, ownership pyramids, minority shareholder expropriation, and comparative capitalism built directly on this insight: the identity and rights of controlling owners are central, not peripheral, to understanding firms and financial markets.
Abstract¶
ABSTRACT We use data on ownership structures of large corporations in 27 wealthy economies to identify the ultimate controlling shareholders of these firms. We find that, except in economies with very good shareholder protection, relatively few of these firms are widely held, in contrast to Berle and Means's image of ownership of the modern corporation. Rather, these firms are typically controlled by families or the State. Equity control by financial institutions is far less common. The controlling shareholders typically have power over firms significantly in excess of their cash flow rights, primarily through the use of pyramids and participation in management.
Related¶
- cite → Theory of the firm: Managerial behavior, agency costs and ownership structure — Corporate Ownership Around the World uses Jensen and Meckling's agency-cost theory to frame conflicts between owners, managers, and controlling shareholders.
- cite → Law and Finance — Corporate Ownership Around the World extends Law and Finance's claim that legal investor protection shapes ownership concentration.
- enables ← Theory of the firm: Managerial behavior, agency costs and ownership structure — Jensen and Meckling's agency-cost theory framed ownership concentration as a governance mechanism, which La Porta and coauthors measured across countries.