Center for Contract and Economic Organization
Center for Law and Economic Studies
In recent years, corporate governance scholarship has begun to focus on the most common distribution of public corporation ownership: outside of the United States and the United Kingdom, publicly owned corporations often have a controlling shareholder.1 The presence of a controlling shareholder is especially prevalent in developing countries. In Asia, for example, some two-thirds of public corporations have one, most of whom represent family ownership.2 The law and finance literature, exemplified by a series of articles by Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, Robert Vishny and others, treats the prevalence of controlling shareholders as the result of bad law; more specifically, controlling shareholders are ubiquitous in countries that do not adequately protect minority shareholders from the extraction of private benefits of control by dominant shareholders.3 The logic is straightforward. Controlling shareholders will not part with control because that will expose them to exploitation by a new controlling shareholder who acquires a controlling position in the market.
Ronald J. Gilson,
Controlling Family Shareholders in Developing Countries: Anchoring Relational Exchange,
Stan. L. Rev.
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/889