Fiche de révision : Les mécanismes de gouvernance d'entreprise

📋 Plan du Cours

1. The Agency Problem
2. Financing Without Governance
3. Legal Protection for Investors
4. Role of Large Investors
5. Role of Large Creditors
6. Costs of Large Investors
7. Specific Governance Arrangements
8. Debt Versus Equity Choice
9. Leveraged Buyouts (LBOs
10. Cooperatives and State Ownership
11. Comparing Governance Systems
12. Conclusion on Corporate Governance Research

📖 1. The Agency Problem

🔑 Notions clés & Définitions

• Separation of ownership and control : Fama, Eugene, and Michael Jensen, 1983a, Separation of ownership and control, Journal of Law and

📝 Points essentiels

• The core risk is that financiers cannot be sure their funds will not be expropriated or wasted on unattractive projects.
• The manager and the financiers typically sign a contract that specifies what the manager does with the funds and how the returns are divided between them.
• Governance 741 get anything but a worthless piece of paper back from the manager? The agency problem in this context refers to the difficulties financiers have in assuring that their funds are not expropriated or wasted on unattractive projects. In most general terms, the financiers and the manager sign a contract that specifies what the manager does with the funds, and how the returns are divided between him and the financiers. Ideally, they would sign a complete contract, that specifies exactly what the manager does in all states of the world, and how the profits are allocated. The trouble is, most future contin- gencies are hard to describe and foresee, and as a result, complete contracts are technologically infeasible. This problem would not be avoided even if the manager is motivated to raise as much funds as he can, and so tries hard to accommodate the financiers by developing a complete contract. Because of these problems in designing their contract, the manager and the financier have to allocate residual control rights-i.e., the rights to make decisions in circum- stances not fully foreseen by the contract (Grossman and Hart (1986), Hart and Moore (1990)). The theory of ownership addresses the question of how these residual control rights are allocated efficiently. In principle, one could imagine a contract in which the financiers give funds to the manager on the
• The essence of the agency problem is the separation of management and finance, or-in more standard terminology- of ownership and control.

💡 À retenir

Corporate governance deals with the agency problem created by the separation between those who supply capital and those who control it. Because control is delegated, financiers need assurance that they will get a return on their financial investment.

📖 2. Financing Without Governance

🔑 Notions clés & Définitions

• Repatriation of profits : The return of some of the profits to the suppliers of finance after they have provided capital to the firm.
• Financing Without Governance : A situation in which capital is supplied without effective governance mechanisms, so the basic puzzle is why suppliers of capital get anything back after parting with their money and having little to contribute afterward.
• Return on investment : Also, in some rapidly growing countries, such as Korea, the rates of return on investment may exceed the rates of appropriation by the insiders.
• Corporate governance problem : But this does not imply that they have solved the corporate governance problem perfectly, or that the corporate governance mechanisms cannot be improved.

📝 Points essentiels

• Corporate governance asks how suppliers of finance get managers to return some of the profits to them.
• Without governance, managers or entrepreneurs could abscond with the money after receiving it or squander it on pet projects.
• Advanced market economies have solved the problem reasonably well in practice, but not perfectly.
• Governance 743 competent or qualified to run the firm (Shleifer and Vishny (1989)). As argued in Jensen and Ruback (1983), poor managers who resist being replaced might be the costliest manifestation of the agency problem. Managerial opportunism, whether in the form of expropriation of investors or of misallocation of company funds, reduces the amount of resources that investors are willing to put up ex ante to finance the firm (Williamson (1985), Grossman and Hart (1986)). Much of the subject of corporate governance deals with constraints that managers put on themselves, or that investors put on managers, to reduce the ex post misallocation and thus to induce investors to provide more funds ex ante. Even with these constraints, the outcome is in general less efficient than would occur if the manager financed the firm with his own funds. An equally interesting problem concerns the efficiency of the ex post re- source allocation, after investors have put up their funds. Suppose that the manager of a firm cannot expropriate resources outright, but has some free- dom not to return the money to investors. The manager contemplates going ahead with an investment project that will give him $10 of personal benefits, but will cost his investors$20 in foregone wealth. Suppose for simplicity that the manager owns no equity in the firm. Then, as argued by Jensen and Meckling (1976), the
• Governance 749 the common element that investors do not get any control rights in exchange for their funds, only the hope that they will make money in the future. Reputation-building is a very common explanation for why people deliver on their agreements even if they cannot be forced to (see, for example, Kreps (1990)). In the financing context, the argument is that managers repay inves- tors because they want to come to the capital market and raise funds in the future, and hence need to establish a reputation as good risks in order to convince future investors to give them money. This argument has been made initially in the context of sovereign borrowing, where legal enforcement of contracts is virtually nonexistent (Eaton and Gersovitz (1981), Bulow and Rogoff (1989)). However, several recent articles have presented reputation- building models of private financing. Diamond (1989, 1991) shows how firms establish reputations as good borrowers by repaying their short term loans, and Gomes (1996) shows how dividend payments create reputations that enable firms to raise equity. There surely is much truth to the reputation models, although they do have problems. As pointed out by Bulow and Rogoff (1989), pure reputational stories run into a backward recursion problem. Suppose that at some point in the future (or in some future states of the world), the future benefits to the

💡 À retenir

Corporate governance asks how suppliers of finance get managers to return some of the profits to them.

📖 3. Legal Protection for Investors

🔑 Notions clés & Définitions

• Legal protection of investors : Concentration of ownership as complementary approaches to governance.
• Shareholder voting rights : Supplemented by an affir- mative duty of loyalty of the managers to shareholders.

📝 Points essentiels

• If firm managers violate the contract, financiers can appeal to the courts to enforce their rights.
• Differences in corporate governance systems across countries stem largely from differences in managers' legal obligations to financiers and in court enforcement.

💡 À retenir

La protection des investisseurs dépend à la fois des droits formels et de la possibilité réelle de les exercer et de les faire respecter. Sans mécanismes juridiques efficaces, la protection seule ne suffit pas à garantir le retour des fonds des investisseurs.

📖 4. Role of Large Investors

🔑 Notions clés & Définitions

• Clear : They have both the interest in getting their money back and the power to demand it.
• Control rights : Concentrated in the hands of a small number of investors with a collectively large cash flow stake, concerted action by investors is much easier than when control rights, such as votes, are split among many of them.
• Large investors : Using this general framework, we discuss several potential costs of having large investors: straightforward expropriation of other inves- tors, managers, and employees;
• Outside directors : Weisbach, Michael, 1988, Outside directors and CEO turnover, Journal of Financial Economics 20, 431-460.

📝 Points essentiels

• Large investors can monitor managers more effectively than dispersed small investors because they have stronger incentives to intervene.
• Ownership concentration is a major governance mechanism because it gives a blockholder enough stake to justify monitoring costs.
• Boards, especially those dominated by outside directors, can sometimes remove top managers.
• Governance 769 theory. First, the virtual absence of protection of minority shareholders makes it attractive for managers to divert resources from the firms despite their large personal cash flow stakes, since in this way they do not need to share with outside investors at all. Second, managers in many cases are not competent to restructure the privatized firms, yet in virtue of their control rights remain on the job and "consume" the benefits of control. In fact, some of the most successful privatizations in Russia have been the ones where outside investors have accumulated enough shares to either replace or otherwise control the management. Such outside investors have typically been less capable of di- verting the profits for themselves than the managers, as well as better capable of maximizing these profits. The example of the Russian privatization vividly illustrates both the benefits and the costs of concentrated ownership without legal protection of minority investors. VII. Which System is the Best? Corporate governance mechanisms vary a great deal around the world. Firms in the United States and the United Kingdom substantially rely on legal protection of investors. Large investors are less prevalent, except that owner- ship is concentrated sporadically in the takeover process. In much of Conti- nental Europe as well as in Japan, there is less reliance on elaborate legal

💡 À retenir

Cette section présente la propriété concentrée comme un mécanisme de gouvernance : une participation importante peut rendre la surveillance et l’intervention rentables. Son efficacité dépend toutefois de la capacité des grands investisseurs à défendre et utiliser leurs droits de contrôle.

📖 5. Role of Large Creditors

🔑 Notions clés & Définitions

• Large creditors : Significant creditors, such as banks, that are large and potentially active investors with a stake in the firm and an interest in seeing the return on their investment maintained.
• Banks : A type of significant creditor that can be especially important in governance because it may hold large investments, play a dominant role in lending, sit on boards of directors, and operate in a legal environment favorable to creditors.
• Large shareholders : Outside investors who concentrate share holdings so that one or several investors hold substantial minority ownership stakes, aligning cash-flow rights and control rights more directly.

📝 Points essentiels

• Debt gives creditors control rights when the borrower fails to adhere to the contract, so nonpayment can trigger a transfer of control from borrower to lender.
• Banks and other large creditors are similar to large shareholders because they have large investments in the firm and want the returns on those investments maintained.

💡 À retenir

Large creditors are governance actors because debt can transfer control rights to lenders when contracts are breached. Their power comes from legal and contractual enforcement, not from ownership.

📖 6. Costs of Large Investors

🔑 Notions clés & Définitions

• Private benefits of control : avantages privés tirés du contrôle, distincts des gains partagés avec les autres investisseurs, que les détenteurs du contrôle peuvent chercher à maximiser.
• Costs of Large Investors : ensemble des coûts liés à la concentration de la propriété, lorsque les grands investisseurs poursuivent leurs propres intérêts au lieu de ceux des autres investisseurs, des employés ou des managers.
• large investors : investisseurs concentrés qui ont à la fois l’intérêt de récupérer leur argent et le pouvoir d’exiger ce remboursement.
• large investors are : investisseurs qui peuvent être trop peu diversifiés, mais surtout qui peuvent utiliser leurs droits de contrôle pour servir leurs propres intérêts plutôt que maximiser la richesse totale.

📝 Points essentiels

• Les banques peuvent n’avoir aucun intérêt à discipliner les managers et peuvent au contraire chercher à les ménager pour obtenir davantage d’affaires, tant que l’entreprise est loin du défaut.
• Les grands investisseurs peuvent être trop « doux » s’ils ne mettent pas fin à des projets non rentables qu’ils ont financés lorsque la continuation leur paraît préférable à la liquidation.
• Un grand investisseur peut préférer les avantages privés du contrôle à la maximisation de la richesse totale.
• Ces problèmes impliquent que les grands investisseurs peuvent échouer à contraindre les managers à maximiser les profits et à leur verser ces profits.

💡 À retenir

La concentration du pouvoir a un revers : les grands investisseurs ne servent pas toujours l’efficacité collective. Ils peuvent protéger leurs propres avantages de contrôle plutôt que d’imposer aux managers une discipline orientée vers la maximisation des profits.

📖 7. Specific Governance Arrangements

🔑 Notions clés & Définitions

• Corporate governance : In the world-including large share holdings, relationship banking, and even takeovers- can be viewed as exam- ples of large investors exercising their power.

📝 Points essentiels

• The section shifts from general governance mechanisms to specific contractual and organizational arrangements.
• State ownership is presented as a particular organizational form that is rarely conducive to efficiency.
• Governance 757 Last but not least, hostile takeovers are politically an extremely vulnerable mechanism, since they are opposed by the managerial lobbies. In the United States, this political pressure, which manifested itself through state anti- takeover legislation, contributed to ending the 1980s takeovers (Jensen (1993)). In other countries, the political opposition to hostile takeovers in part explains their general nonexistence in the first place. The takeover solution practiced in the United States and the United Kingdom, then, is a very imperfect and politically vulnerable method of concentrating ownership. C. Large Creditors Significant creditors, such as banks, are also large and potentially active investors. Like the large shareholders, they have large investments in the firm, and want to see the returns on their investments materialize. Their power comes in part because of a variety of control rights they receive when firms default or violate debt covenants (Smith and Warner (1979)) and in part because they typically lend short term, so borrowers have to come back at regular, short intervals for more funds. As a result of having a whole range of controls, large creditors combine substantial cash flow rights with the ability to interfere in the major decisions of the firm. Moreover, in many countries, banks end up holding equity as well as debt of the firms they invest
• In Section VI, we turn to several specific examples of widely used corporate governance mechanisms, which illustrate the roles of legal protection and concentrated ownership in corporate governance.

💡 À retenir

Cette section passe des principes généraux à des dispositifs concrets de gouvernance, en particulier la conception juridique des contrats de financement et la forme de propriété. Elle met aussi en contraste la dette, les clauses contractuelles et la propriété publique comme arrangements de gouvernance.

📖 8. Debt Versus Equity Choice

🔑 Notions clés & Définitions

• Equity : In particular, we now focus on debt and equity as instruments of finance.

📝 Points essentiels

• Debt gives creditors control rights when covenants are violated, especially upon default.
• Equity is distinguished from debt by voting rights rather than creditor-style enforcement rights.
• Governance 765 Because the equity holders have voting power and legal protection of minor- ity shareholders, they have the ability to extract some payments from the managers in the form of dividends. Easterbrook (1984) articulates the agency theory of dividend payments, in which dividends are for equity what interest is for debt: pay out by the managers supported by the control rights of the financiers, except in the case of equity these control rights are the voting rights. More recently, Fluck (1995) and Myers (1995) present agency-theoretic models of dividends, based on the idea that shareholders can threaten to vote to fire managers or liquidate the firm, and therefore managers pay dividends to hold off the shareholders. These models do not explicitly address the free rider problem between shareholders; namely, how do they manage to organize themselves to pose a threat to the management when they are small and dispersed? Concentration of equity ownership, or at least the threat of such concentration, must be important to get companies to pay dividends. One of the fundamental questions that the equity contracts raise is how- given the weakness of control rights without concentration- do firms manage to issue equity in any substantial amounts at all? Equity is the most suitable financing tool when debt contracts are difficult to enforce, i.e., when no specific collateral can
• Governance 757 Last but not least, hostile takeovers are politically an extremely vulnerable mechanism, since they are opposed by the managerial lobbies. In the United States, this political pressure, which manifested itself through state anti- takeover legislation, contributed to ending the 1980s takeovers (Jensen (1993)). In other countries, the political opposition to hostile takeovers in part explains their general nonexistence in the first place. The takeover solution practiced in the United States and the United Kingdom, then, is a very imperfect and politically vulnerable method of concentrating ownership. C. Large Creditors Significant creditors, such as banks, are also large and potentially active investors. Like the large shareholders, they have large investments in the firm, and want to see the returns on their investments materialize. Their power comes in part because of a variety of control rights they receive when firms default or violate debt covenants (Smith and Warner (1979)) and in part because they typically lend short term, so borrowers have to come back at regular, short intervals for more funds. As a result of having a whole range of controls, large creditors combine substantial cash flow rights with the ability to interfere in the major decisions of the firm. Moreover, in many countries, banks end up holding equity as well as debt of the firms they invest

💡 À retenir

Cette section compare la dette et l’equity comme deux instruments de financement qui se distinguent surtout par l’allocation du contrôle. La dette donne aux créanciers des droits de contrôle et de saisie en cas de violation des clauses, tandis que l’equity repose sur des droits de vote.

📖 9. Leveraged Buyouts (LBOs

🔑 Notions clés & Définitions

• Leveraged buyout : Kaplan, Steven, 1991, The staying power of leveraged buyouts, Journal of Financial Economics 29, 287-313.

📝 Points essentiels

• An LBO is relevant because high leverage can strengthen creditor discipline over managers.
• The title points to a governance setting in which debt is used intensively to reshape control incentives.

💡 À retenir

Cette section présente le leveraged buyout comme une forme hybride de gouvernance fondée sur un endettement élevé et une propriété concentrée. Elle s’inscrit dans les mécanismes qui utilisent la structure de financement pour modifier les incitations des dirigeants et renforcer la discipline après une transaction de contrôle.

📖 10. Cooperatives and State Ownership

🔑 Notions clés & Définitions

• State ownership : A similar argument has been used to justify state ownership of firms.

📝 Points essentiels

• The survey pays some attention to cooperatives but does not focus on a broad variety of noncapitalist ownership patterns.
• Worker ownership and nonprofit organizations are explicitly set aside from the main analysis.
• State ownership is treated as a distinct ownership form rather than a standard capitalist governance arrangement.
• These ownership forms are discussed mainly as contrasts to the investor-centered governance model.

💡 À retenir

Cette section fixe la frontière de l’étude : les formes de propriété alternatives sont reconnues, mais elles ne constituent pas le cœur de l’analyse. La propriété d’État est traitée comme une forme distincte et rarement efficace, surtout en contraste avec la gouvernance centrée sur les investisseurs.

📖 11. Comparing Governance Systems

🔑 Notions clés & Définitions

• Governance systems : Above discussion does not address the question that has interested many people, namely which of the developed corporate governance systems works the best?

📝 Points essentiels

• Much of the difference in corporate governance systems around the world stems from differences in the nature of legal obligations managers have to financiers and in how courts interpret and enforce those obligations.
• The empirical literature is uneven across countries, with much more written in English about the United States than about the rest of the world, including other wealthy economies.
• Governance 773 informed investors. These investors may be better able to help distressed firms as well. Still, there are serious questions about the effectiveness of these investors, largely because their toughness is in doubt. As Charkham (1994) has shown, German banks are large public institutions that effectively control themselves. There is little evidence from either Japan or Germany that banks are very tough in corporate governance. Finally, at least in Germany, large- investor-oriented governance system discourages small investors from partic- ipating in financial markets. In sum, despite a great deal of controversy, we do not believe that either the theory or the evidence tells us which of the three principal corporate governance systems is the best. In this regard, we are not surprised to see political and economic pressures for the three systems to move toward each other, as exemplified by the growing popularity of large share- holders in the United States, the emergence of public debt markets in Japan, and the increasing bank-bashing in Germany. At the same time, in thinking about the evolution of governance in transition economies, it is difficult to believe that either significant legal protection of investors or takeovers are likely to play a key role. In all likelihood, then, unless Eastern Europe is stuck with insider domination and no private exter- nal finance
• Successful corporate governance systems, such as those of the United States, Germany, and Japan, combine significant legal protection of at least some investors with an important role for large investors.

💡 À retenir

The section compares corporate governance systems across countries by focusing on legal protection, concentrated ownership, and the question of which arrangement best attracts external funds. It also emphasizes that the evidence base is uneven, with far more research available on the United States than on most other countries.

📖 12. Conclusion on Corporate Governance Research

🔑 Notions clés & Définitions

• CORPORATE GOVERNANCE : Only enlightens the discussion of perhaps marginal improvements in rich econo- mies, but can also stimulate major institutional changes in places where they need to be made.
• Empirical evidence : Although there has been a great deal of theoretical discussion of governance by large creditors, the empirical evidence of their role remains scarce.

📝 Points essentiels

• The survey concludes that corporate governance is of enormous practical importance even in advanced market economies, not just in less developed or transition economies.
• The article repeatedly notes that corporate governance mechanisms can be improved, including through stronger legal protection and more effective roles for large investors.
• The research base is thin for many countries, so the survey reflects a major dearth of worldwide evidence.
• The conclusion is shaped by the article's limited scope and by the concentration of available studies in a few economies, especially the United States, with additional attention to Japan, Germany, Italy, Sweden, and Russia.
• Governance 747 lowest among firms with low Tobin's Qs and high cash flows. Their result supports Jensen's (1986) version of agency theory, in which the worst agency problems occur in firms with poor investment opportunities and excess cash. In sum, quite a bit of evidence points to the dominance of managerial rather than shareholder motives in firms' acquisition decisions. Even clearer evidence of agency problems is revealed by the studies that focus on managers directly threatened with the loss of private benefits of control. These are the studies of management resistance to takeovers, which are now too numerous to survey completely. Walkling and Long (1984) find that managerial resistance to value-increasing takeovers is less likely when top managers have a direct financial interest in the deal going through via share ownership or golden parachutes, or when top managers are more likely to keep their jobs. Another set of studies finds that, when managers take anti-takeover actions, shareholders lose. For example, DeAngelo and Rice (1983) and Jarrell and Poulsen (1988a) find that public announcements of certain anti-takeover amendments to corporate charters, such as super-major- ity provisions requiring more than 50 percent of the votes to change corporate boards, reduce shareholder wealth. Ryngaert (1988) and Malatesta and Walkling (1988) find that, for firms who have
• Governance 739 power. Specifically, we consider reputation-building in the capital market and excessive investor optimism, and conclude that these are unlikely to be the only reasons why investors entrust capital to firms. Sections III and IV then turn to the two most common approaches to corporate governance, both of which rely on giving investors some power. The first approach is to give investors power through legal protection from expro- priation by managers. Protection of minority rights and legal prohibitions against managerial self-dealing are examples of such mechanisms. The second major approach is ownership by large investors (concentrated ownership): matching significant control rights with significant cash flow rights. Most corporate governance mechanisms used in the world-including large share holdings, relationship banking, and even takeovers- can be viewed as exam- ples of large investors exercising their power. We discuss how large investors reduce agency costs. While large investors still rely on the legal system, they do not need as many rights as the small investors do to protect their interests. For this reason, corporate governance is typically exercised by large investors. Despite its common use, concentrated ownership has its costs as well, which can be best described as potential expropriation by large investors of other investors and stakeholders in the

💡 À retenir

The survey concludes that corporate governance is of enormous practical importance even in advanced market economies, not just in less developed or transition economies.

🧩 Compléments de couverture

1. La gouvernance d’entreprise vise à s’assurer que les apporteurs de fonds récupèrent un rendement sur leur investissement, en empêchant notamment les dirigeants de détourner le capital ou de l’investir dans de mauvais projets.
2. La théorie contractuelle de la firme associe explicitement la problématique d’agence à Coase, Jensen et Meckling, ainsi qu’à Fama et Jensen.
3. Quand le contrat ne suffit pas, les parties doivent répartir des droits de contrôle résiduels, c’est-à-dire des droits de décision pour les circonstances non prévues.
4. Dans de nombreux pays, les tribunaux n’interviennent que pour des violations massives des droits des investisseurs, ce qui limite fortement l’exécution des contrats.
5. Les droits de vote des actionnaires sont coûteux à exercer et à faire respecter, ce qui favorise l’abstention des petits investisseurs.
6. Dans les pays à système juridique plus faible, les managers peuvent violer plus ouvertement les droits de vote, par exemple en menaçant des salariés-actionnaires ou en empêchant des actionnaires hostiles de voter.
7. La structure des conseils d’administration varie fortement selon les pays, allant des conseils à deux niveaux en Allemagne aux conseils dominés par les initiés au Japon.
8. Les conseils d’administration n’agissent souvent qu’en cas d’échec de performance grave, et les preuves disponibles sur leur efficacité sont mixtes.
9. Le devoir de loyauté des dirigeants envers les actionnaires est généralement admis dans les pays de l’OCDE, mais son application judiciaire varie beaucoup.
10. Les restrictions juridiques les plus courantes visent l’auto-transaction des dirigeants, comme le vol, la rémunération excessive ou l’émission de titres supplémentaires à leur profit.
11. Les banques n’ont souvent aucun intérêt à discipliner les dirigeants et peuvent même chercher à les ménager pour obtenir davantage d’affaires.
12. Les grands investisseurs peuvent aussi être trop conciliants lorsqu’ils hésitent à liquider des projets non rentables déjà financés.
13. Un grand investisseur peut préférer maximiser ses bénéfices privés de contrôle plutôt que la richesse totale des actionnaires.
14. La dette se distingue de l’équité parce qu’un manquement au contrat transfère des droits de contrôle du débiteur au prêteur, notamment via la saisie d’actifs ou la faillite.
15. La dette est aussi liée à des clauses restrictives, comme l’obligation de maintenir la valeur des actifs dans l’entreprise.
16. Avant l’analyse de Grossman et Hart, Gale et Hellwig montrent que le contrat de dette optimal minimise les coûts d’enquête attendus.
17. Myers et Majluf soutiennent que la dette bien notée est émise avant les actions parce qu’elle est plus facile à valoriser.
18. 180 on Sat, 18 Feb 2023 15:46:23 UTC All use subject to https://about.

📅 Repères chronologiques

📊 Tableaux de Synthèse

Financing and control

Governance actors and trade-offs

⚠️ Pièges & Confusions Fréquentes

1. Confusing legal investor protection with actual enforceability in courts
2. Treating concentrated ownership as always beneficial rather than also costly
3. Mixing up debt control rights with equity voting rights
4. Assuming large creditors always discipline managers strongly
5. Assuming boards always remove managers instead of only sometimes doing so
6. Equating state ownership with the standard investor-centered governance model

✅ Checklist Examen

1. Define the agency problem as the separation between those who supply capital and those who control it
2. Remember that complete contracts are infeasible because future contingencies are hard to describe and foresee
3. Know that residual control rights are allocated when contracts do not specify all states
4. Distinguish formal investor rights from the ability to enforce them in court
5. Explain why large investors can monitor better than dispersed small investors
6. Recall the costs of large investors: expropriation, softness, and private control benefits
7. Separate debt from equity by their control allocation
8. Link LBOs to high leverage and concentrated ownership
9. Recognize state ownership as a distinct and usually inefficient form
10. Remember that governance systems differ largely because of legal obligations and court enforcement