Corporate Governance and the Plight of Minority Shareholders in the United States before the Great Depression

Abstract

This chapter discusses the rise of corporations in the U.S. during the late nineteenth century and how their emergence was accompanied by decreased protection of minority shareholder rights. It compares the interest of investors in partnerships and corporations and suggests that the willingness of investors to participate in corporations, as opposed to partnerships, was affected by the extent to which their returns could be expropriated by controlling shareholders. The implication of this model is that organizational problems would only dissuade investors from putting their funds in firms whose expected returns were low.

Files

Additional details