This paper explores the role of corporate law in the minting of capital. Capital, as the term is used here, is more than the means of production in Marx’s account or a factor of production in the nomenclature of economists, and has even less to do with the paid in ‘capital’ immortalized in corporate law statutes. I use the term capital to denote assets that have “income yielding capacity” (Veblen), with the add-on that the expected future income can be realized today through exchange. Three legal attributes ensure that some assets have greater income yielding capacity than others: priority, universality, and durability. Once assets that enjoy these attributes are made transferable, they can turn future cash flows into current income. I develop the argument more fully in my forthcoming book, “The Code of Capital”. In this paper, I explore the contribution of corporate law to the minting of capital and reconsider the concept of “shareholder value maximization” in light of these findings.
(Paper is not yet publicly available)
Professor of Finance
London Business School
Professor of Finance, Stockholm School of Economics
Professor of Law and Director
Columbia Law School