Fundamental Tradeoffs in the Publicly Traded Corporation

Abstract

This article discusses some fundamental cost-benefit tradeoffs involving publicly traded corporations from a corporate finance viewpoint. The fundamental benefits include greater access to capital at a lower cost and economies of scale. The potential costs are associated with two fundamental problems: principal–agent conflicts of interest and information asymmetry. Various mechanisms have evolved in the United States to mitigate these problems and their costs, so that the bulk of the fundamental benefits can be realized.