Large shareholders and corporate governance outside the U nited S tates and U nited K ingdom

The pioneering work of Berle and Means (1932) showed for the first time that US listed companies have their ownership rights dispersed among a large number of small investors since the early decades of the twentieth century. Building on this evidence, in the succeeding decades governance scholars have shown that the fragmentation of the ownership rights among a large number of small investors has some potentially negative consequences for the corporate governance of a firm. In particular, it creates the separation between ownership and control, i.e. control rights are delegated to top managers without ownership rights, which often provides little incentives for shareholders to monitor top managers because the monitor incurs all the costs while the benefits are distributed only proportionally according to the shareholder ownership (Hart, 1995).