Corporations, Accounting, Securities Laws, and the Extinction of Capitalism

4Corporations

DOI: 10.4324/9781003240969-6

Introduction

In 1991, Ronald Coase was awarded the Noble Prize in Economics for his work introducing the nature of the corporation, which he referred to as the “firm,” as an explanation for why corporations exist. In his 1937 work, he concluded that “the main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism” (p. 390). He then uses the concept of transaction costs to explain the nature and limits of firms, concluding that the reason firms exist is in order to reduce transaction costs. Still not finished, in 1990 he continued to emphatically explain “transaction cost considerations undoubtedly explain why firms come into existence.” ...