Political and legal restraints on ownership and control of public companies

Abstract

Abstract Law and politics affect the financial structure of the public corporation, perhaps as much as economics. Law restricts financial institutions from holding large equity blocks and from networking the small blocks they do own. Impetus for these restrictions came from several sources: a public-spirited belief that financial stability would be fostered by financial fragmentation, American federalism (each state created its own insular set of financial institutions), rivalries between groups of financial institutions, and popular mistrust of powerful private financial institutions. The stability of many of these rules also derives from the political resistance that one would expect corporate managers and benefited financial institutions to offer to any change.