A Theory of the Firm : : Governance, Residual Claims, and Organizational Forms / / Michael C. Jensen.

• Superior document: Title is part of eBook package: De Gruyter HUP eBook Package Archive 1893-1999
• VerfasserIn: Jensen, Michael C.,
• Place / Publishing House: Cambridge, MA : : Harvard University Press, , [2003]; ©2003
• Year of Publication: 2003
• Language: English
• Physical Description: 1 online resource (323 p.)

This collection examines the forces, both external and internal, that lead corporations to behave efficiently and to create wealth. Corporations vest control rights in shareholders, the author argues, because they are the constituency that bear business risk and therefore have the appropriate incentives to maximize corporate value. Assigning control to any other group would be tantamount to allowing that group to play poker with someone else's money, and would create inefficiencies. The implicit denial of this proposition is the fallacy of the so-called stakeholder theory of the corporation, which argues that corporations should be run in the interests of all stakeholders. This theory offers no account of how conflicts between different stakeholders are to be resolved, and gives managers no principle on which to base decisions, except to follow their own preferences. In practice, shareholders delegate their control rights to a board of directors, who hire, fire, and set the compensation of the chief officers of the firm. However, because agents have different incentives than the principals they represent, they can destroy corporate value unless closely monitored. This happened in the 1960s and led to hostile takeovers in the market for corporate control in the 1970s and 1980s. The author argues that the takeover movement generated increases in corporate efficiency that exceeded $1.5 trillion and helped to lay the foundation for the great economic boom of the 1990s.

Table of Contents

Frontmatter -- Contents -- Preface -- Introduction -- I Corporate Governance and the Market for Corporate Control -- 1 U.S. Corporate Governance: Lessons from the 1980s -- 2 The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems -- 3 Active Investors, LBOs, and the Privatization of Bankruptcy -- II Agency Costs, Residual Claims, and Incentives -- 4 Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure -- 5 Stockholder, Manager, and Creditor Interests: Applications of Agency Theory -- 6 Rights and Production Functions: An Application to Labor-Managed Firms and Codetermination -- 7 Organizational Forms and Investment Decisions -- 8 The Distribution of Power among Corporate Managers, Shareholders, and Directors -- Notes -- References -- Acknowledgments -- Index