Page info: *Author: Mathiesen, H. *Document version: 2.5. *Copyright 1997-2019, H. Mathiesen. Legal notice.


Exhibition: The corporate decision system and its transaction costs


Introduction: The key point of this exhibition is that there are costs and benefits from separation of control rights. The gains from separating direct ownership from direct control is caused by specialization of labour where stockholders specialize in providing capital and directors specialize in providing management. Further separation of control between directors and operational managers may have the benefit of decreasing the possibility of fraud and abuse of control rights. However, most benefits come at a price. In this case the lack of incentives and increased bureaucracy. The ideas of this figure are very similar to those suggested by Fama and Jensen [1983a] and Easterbrook and Fichel [1983].



Copyright 1997-2019, H. Mathiesen. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Legal notice.