Abstract
In this paper I have tried to make the simple point that the shareholder's problem is a collective choice problem. Because of Arrow's Possibility Theorem we must draw the pessimistic conclusion that under very general institutional arrangements there is no Arrow constitution for the firm. Of course, constitutions do exist for theoretical special cases, which have been widely used in the past literature. Although these cases have obvious important roles to play for many positive theoretical problems, they may be too simplistic to explain more complicated phenomenon relating to the financial and organizational structure of firms.
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