Corporate Finance, the Theory of the Firm, and Organizations

Patrick Bolton and David Scharfstein

Journal of Economic Perspectives, 1998, vol. 12, issue 4, 95-114

Abstract: Much of the modern research on firm boundaries, following Ronald Coase (1937), assumes that firms are run by owner-managers. This contrasts with the agency literature, following Adolph Berle and Gardiner Means (1932), that emphasizes the problems that arise when managers are not owners. In this paper, the authors argue that a richer theory of the firm should integrate Coase and Berle and Means. They illustrate this point by reexamining the oft-cited merger of General Motors and Fisher Body. The authors also show how linking these literatures can be used to understand one of the key roles of corporate headquarters, the allocation of capital.

JEL-codes: C62 D20 G32 G34 (search for similar items in EconPapers)
Date: 1998
Note: DOI: 10.1257/jep.12.4.95
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Citations: View citations in EconPapers (71)

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