ABSTRACT

This chapter builds on the previous taxonomy of private benefits of control to develop a broader framework for the analysis of corporate governance. It is shown that shareholders may accept to relinquish control rights in order to support entrepreneurship rewarded by the extraction of idiosyncratic private benefits of control. This chapter also shows that, if corporate law does not restrict the range of feasible allocations of control rights, an optimal ownership structure is chosen by companies in the presence of idiosyncratic private benefits; ownership is bound to evolve efficiently through a series of friendly takeovers. The efficiency of this mechanism requires, however, that the law disallow expropriation of non-controlling shareholders.