The Nature of the Business Corporation: Its Legal Structure and Economic Functions

Katsuhito Iwai

The Japanese Economic Review, 2002, vol. 53, issue 3, 243-273

Abstract: Between a classical firm and a business corporation lies a fundamental difference in legal structure. While the first consists of a single ownership relation between owners and assets, the second consists of two overlapping ownership relations—between shareholders and the corporation, and between the corporation and corporate assets. The latter legal relation is indirect and exists only through the intermediary of the corporation that performs the dual role of a thing and a person. This paper shows how such two–tier ownership structure of the business corporation fundamentally affects the form of its organization, the ways and means of its governance and the efficiency of its performances. JEL Classification Numbers: D23, G30, K00, K22, L20.

Date: 2002
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