Does Law Matter?: The Separation of Ownership and Control in the United Kingdom

Abstract

The corporate world today subdivides into rival systems of dispersed and concentrated ownership, with different corporate governance structures characterising each. Various corporate governance experts have argued that ownership concentration is a consequence of poor legal protection of shareholders. The experience in the United Kingdom casts doubt, however, on the extent to which legal regulation matters in the corporate governance context. Developments in the UK suggest that a highly specific set of laws governing companies and financial markets do not have to be in place in order for dispersed share ownership and strong securities markets to develop. Instead, alternative institutional structures can perform the function "law matters" advocates say the legal system needs to play.

JEL Classification: G30, G32, K22, N24