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This Article starts with the recognition that the average private benefits of control vary significantly across countries. But why? The simplest explanation ascribes this variation to differences in law between jurisdictions: for example, the law of jurisdiction X could privilege controlling shareholders by allowing them to extract benefits from their corporation in the form of above-market salaries or non-pro-rata payments in connection with self-dealing transactions. But, this explanation cannot fit all cases. To illustrate, if the substantive law is essentially similar between two jurisdictions while the private benefits of control appear to be significantly different, then some other explanation must be found. One possible alternative explanation could involve differences in enforcement mechanisms: one jurisdiction might have established powerful and well-incentivized mechanisms of private enforcement, while another jurisdiction having the same substantive law did not. Or, one jurisdiction might invest more heavily than the other in public enforcement. Still, if these explanations also fail (or, at least, seem implausible), then the next most logical explanation involves social norms. That is, if two jurisdictions having similar legal rules and enforcement systems appear to permit controlling shareholders to extract on average very different levels of private benefits, then we may be witnessing a difference in prevailing norms. This Article will argue that this pattern is not only possible, but pervasive.


Business Organizations Law | Comparative and Foreign Law | Law | Securities Law


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