Article2006

Does shareholder primacy lead to a decline in managerial accountability?

33 citations0/0 files storedCambridge Journal of Economics

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Corporate Finance and Governance Auditing, Earnings Management, Governance Corporate Governance and Financial Management

Abstract

Shareholder primacy is increasingly considered to be the most effective way to foster managerial (corporate) accountability. Contrary to this now standard argument, we consider that shareholder primacy, rather than gatekeeper failure, is directly responsible for the multiplication of accounting irregularities and the dramatic increase in executive compensations. To defend this thesis, we propose a new reading of Berle and Means (1932), Galbraith (1973) and Alchian and Demsetz (1972), stressing the logical failure of a control of the business firm provided for by stock markets: the implementation of shareholder primacy implies a partial disconnection between access to internal knowledge and empowerment. In turn, this disconnection favours deceptive behaviours on the part of corporate insiders. Empirical evidence mostly based on Enron-era financial scandals illustrates our argument.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 33 citations exist upstream.

References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 1937The Nature of the Firm 1964CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*1980Agency Problems and the Theory of the Firm 1996Production, Information Costs and Economic Organization 1933The Modern Corporation and Private Property 1975THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS**This paper is another in a series of interrelated theoretical and statistical studies of corporate financial and investment policies being made under grants from the Rockefeller Foundation, and more recently the Ford Foundation, to the Harvard Business School. The generous support for this work is most gratefully acknowledged. The author is also much indebted to his colleagues Professors Bishop, Christenson, Kahr, Raiffa, and (especially) Schlaifer, for extensive discussion and commentary on an earlier draft of this paper; but responsibility for any errors or imperfections remains strictly his own.[Professor Sharpe's paper, “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Journal of Finance, September 1964) appeared after this paper was in final form and on its way to the printers. My first section, which parallels the first half of his paper (with corresponding conclusions), sets the algebraic framework for sections II, III and VI, (which have no counterpart in his paper) and for section IV on the equilibrium prices of risk assets, concerning which our results differ significantly for reasons which will be explored elsewhere. Sharpe does not take up the capital budgeting problem developed in section V below.]1995The Limits of Arbitrage

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.