This article investigates the distribution of equity ownership between entrenched management and dispersed outsiders when management has the ability to manipulate the cash flows and when it is costly for equity holders to prove managerial wrongdoing in court. Management chooses the distribution...

This article presents a theory of outside equity based on the control rights and the maturity design of equity. I show that outside equity is a tacit agreement between investors and management supported by the equity-holders' right to dismiss management regardless of performance and by the lack...