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Exhibition: The corporate decision system and its transaction costs Introduction: The key point of this exhibition is that there
are costs and benefits from separation of control rights. The gains from
separating direct ownership from direct control is caused by specialization
of labour where stockholders specialize in providing capital and directors
specialize in providing management. Further separation of control between
directors and operational managers may have the benefit of decreasing the
possibility of fraud and abuse of control rights. However, most benefits come
at a price. In this case the lack of incentives and increased bureaucracy.
The ideas of this figure are very similar to those suggested by Fama and
Jensen [1983a] and Easterbrook and Fichel [1983]. |
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Copyright 1997-2008, ViamInvest. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Legal notice. |
