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RESEARCH PRODUCT

Beyond the Law and Finance Approach: The Shareholders' Cognitive Role and Its Effects on the Analysis of Ownership Structure and Corporate Governance

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The dominant law and finance approach of ownership structure and corporate governance is based on an unrealistic assumption, that of a total complete separation between ownership and control, in particular in the European nations. This approach based on the seminal Berle and Means' analysis and on agency theory, postulates that shareholders carry only a financial function limited to equity financing and assumption of financial risk. In view of the actual ownership structures, this approach has a weak explanatory power. Therefore, this article proposes another model, based on the cognitive role - directing and contribution of competences -, that the main shareholders often keep. It is possible to consider this model as a component of a corporate governance theory extended to cognitive variables.