Corporate Entities: Their Ownership, Control, and Purpose

Abstract

This Chapter in the forthcoming Oxford Handbook of Law and Economics provides an introduction to the law and economics of the corporate form. It first distinguishes “the corporation” from “the firm.” It then describes and discusses the characteristics of the corporate form, including legal personality, limited liability, delegated management, transferable equity, and perpetual life. It then reviews the dominant theories of the corporation, including the entity theory, the aggregate theory, the property (principal/agent) theory, the nexus of contracts theory, the team production theory, and the franchise government/concession theory. It concludes by discussing various theories of corporate purpose, including the state interest, managerialist, customer service, shareholder value/primacy, stakeholder welfare, team production, and long-term production approaches to understanding the purpose of corporations.