Shareholder Empowerment and Ownership Structure in a Free-Contracting Environment

We study how firms choose to allocate decision powers to shareholders or management in a historical context where control allocation was not mandated by corporate law but ownership structures were constrained by differences in regional wealth distributions. Firms with numerous small -and plausibly less informed- owners tend to disempower shareholders and increase managerial authority. Moreover, shareholder empowerment is accompanied by provisions promoting information acquisition by owners, suggesting that control and information are complements. Our findings highlight how the debate on shareholder empowerment should account for the critical role of ownership structure.