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Monitoring costs as a basis for the dispersion of firm ownership
Author(s) -
Jaditz Ted
Publication year - 1992
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090130104
Subject(s) - dispersion (optics) , shareholder , enterprise value , variance (accounting) , value (mathematics) , microeconomics , phenomenon , point (geometry) , econometrics , economics , business , monetary economics , industrial organization , accounting , finance , statistics , mathematics , corporate governance , physics , geometry , quantum mechanics , optics
This paper proposes a model of endogenous shareholder dispersion. We find ownership structure causes variance in firm value, not vice versa, and contra to Demsetz and Lehn (1985). Conditions are also identified where increases in ownership dispersion maximize firm value, contra to Shleifer and Vishny (1986). The model suggests that ownership dispersion is a dynamic phenomenon that may change with interest rates or the set of alternative uses of firm resources. The conclusion is that there is not likely to be one ‘best’ structure of firm ownership, either for an individual firm over time or for all firms at a single point in time.