| Keywords [eng] |
principal/agency theory, agency costs, agency theory, shareholder theory, transaction costs, economics, law and economics, corporate law, corporations, corporate governance, stakeholder theory, enlightened shareholder value, the market for corporate control, comparative analysis. |
| Abstract [eng] |
The thesis discusses and traces the evolution of the key economic theories that have had the most influence on our modern understanding of the corporation and their implications for company law. Older generations of economists such as Adam Smith were able to articulate early formulations of issues that modern economic theories aim to solve. A more modern articulation of these issues came in the work of Berle and Means and their discussion of the separation of ownership which was occurring in most large firms. One of the biggest contributions to our understanding of the firm came from the work of Coase whose analysis was able to explain the emergence of the firm within the market. However, within the framework of Coase and other economists at the time, the firm was a ‘black box’ and there was no framework to understand its internal dynamics. Jensen and Meckling’s principal/agent theory and their formulation of agency costs provided an important insight into how firms operate. There is a myriad of corporate governance and legal strategies that shareholders may adopt to mitigate agency costs, however, most existing jurisdictions make it difficult to do so. The work of Jensen and Meckling also justifies shareholder value theory through its consideration of shareholders and residual claimants. This approach arguably leads to pernicious social effects stemming from corporate power. However, there is substantial evidence that activist shareholders pursue socially conscious policies and that this has a positive impact on firm value. Thus, the work concludes that company law should aim to empower shareholders to pursue socially conscious policies. In summary, this research provides a comprehensive understanding of the key economic theories that have had the most impact on our modern understanding of the corporation. The nuanced examination of economic theories is then applied to contribute valuable insights into the role of company law. |
