The Alleged Separation of Ownership and Control in the Theory of the Firm : A Dynamic, Historical Approach

The paper suggests that the largely static, ahistorical existing literature on the theory of the firm is inadequate in its treatment of the control issue. It tends to classify firms as either owner or manager controlled using an ex post analysis of share distribution. In contrast, this paper reverses the direction of causality, explaining the control of firms in a dynamic, historical framework. It concludes that the observed distribution of shares will suffice to give a subset of owners control. The argements are illustrated by a series of diagrams, and supported by an examination of recently reported empirical evidence.