IN a recent article appearing in this Journal, Holl [2] tests the proposition that firms which are controlled by professional managers will fail to maximise profits. Several studies in the US have concluded that the separation of ownership from control has had little or no effect on company profitability, and Holl's main point is that these have failed to consider the restraint imposed by the market for corporate control. Holl argues that when this is done the hypothesized non-profit maximising behaviour of professional managers is demonstrated, although the extent of the effect is less general than lhas been thought (i.e. it is limited to those management controlled companies which can evade the discipline of the market). The purpose of this note is to show that proponents of the separation thesis should not be heartened by the result achieved by Holl, since it is heavily dependent on the form which his hypothesis takes. Holl's central hypothesis is the managers in mllanagement controlled (MC) firms unconstrained by the market for corporate control will take advantage of their independence and, in pursuing their own (growth maximising) ends, earn lower returns than are available in owvner controlled (OC) firms. Holl surmises that the constraint imposed by the market for corporate control is manifested in two ways. First, there is tl-he punitive discipline whicl arises when a company is actually taken over. The second form of restraint is the continuing corrective discipline which is exercised by the market in the longer period. An cfficient market for corporate control will constrain 'a firm to pursue policies which result in the valuation ratio moving towards the long run industry average' (Holl [2, p. 26I]). But if companies can maintain below average valuation ratios for lengthy periods without being taken over, this indicates they have somehow managed to evade market discipline. Although it is not mentioned by Holl, in his sample the proportion of OC firms which apparently wvere unconstrained by this market discipline is actually slightly higher than that for MC firms (38.10% as against 37.3 00). This result calls to mind the findings of several earlier studies. Hindley [I] employed the inverse of the valuation ratio (R) as a measture of efficiency in order to test the effectiveness of the market for corporate control in the US during the late 1950$ and early i960s. He found that while most contested companies had an R value higher (and thus a valuation ratio lower) than their industry median, a significant proportion had high R values and yet control was retained. It was concluded that the market was at least partially