1. Corporate Finance, the Theory of the Firm, and Organizations
Financial English Presentation
Corporate Finance, the Theory of the Firm, and Organizations
Yu Haibo

2. The main four parts of the paper
Coase and Integration
Berle and Means and the Separation of Ownership and Control
A Reexamination of the Merger between General Motors and Fisher Body
Corporate Headquarters and the Allocation of Capital

3. The main points the paper concentrate on
The interactions between owner-managers
The separation of ownership and control

4. Coase and Integration
It is difficult to write contracts that fully specify what should happen in future situa-tions that are hard to foresee or describe. （Coase）
A should own B when A's relationship-specific investments are considerably more important than those of B; that B should own A when the reverse is true; and that there should be no integration when both make important relationship-specific investments.(GHM model）

5. Berle and Means and the Separation of Ownership and Control
The separation of ownership and control may lead managers to pursue their own objectives at the expense of owners.(Berle and Means)
If managers own only a portion of the company's equity, they will overindulge in perquisites since they get all of the benefits, but bear only a portion of the costs. [Jensen and Meckling (1976)]

6. A Reexamination of the Merger between General Motors and Fisher Body
First, the parties to the bargaining are not owners, but rather division managers—agents of the true owners.
In addition, they are not bargaining over the profits they will pocket themselves, but rather for their division’s share of corporate resources to be used mainly for investment.
Finally, and importantly, there is a third party in the bargaining, the group vice president or corporate headquarters, who has ultimate control over the distribution and use of these resources.
Integration results in greater centralization of decision-making

7. Corporate Headquarters and the Allocation of Capital
Integration does not see as leading to greater centralization,only as reallocating bargaining power.
Integration can lead to inefficient outcomes from decision- making processes

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