On the Origins, Meaning and Influence of Jensen and Meckling's Definition of the Firm

David Gindis

doi:10.1093/oep/gpaa012

On the Origins, Meaning and Influence of Jensen and Meckling's Definition of the Firm

David Gindis

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Abstract

Jensen and Meckling’s 1976 definition of the firm as a legal fiction which serves as a nexus of contracts between individuals sits well with the Coasean narrative on the firm while at the same time being at odds with it. Available interviews with Jensen shed little light on the origins and meaning of this unusual definition. The article shows how the definition captured, and was a response to, the American socio-political context of the first half of the 1970s, and traces how Jensen and Meckling employed it once they themselves got immersed in the public debate about corporate regulation in the late 1970s. It also briefly considers Jensen and Meckling’s place in the literature on the economics of corporate law developed in the 1980s.

Original language	English
Pages (from-to)	966-984
Number of pages	19
Journal	Oxford Economic Papers
Volume	72
Issue number	4
Early online date	1 Sept 2020
DOIs	https://doi.org/10.1093/oep/gpaa012
Publication status	Published - 1 Oct 2020

Keywords

Jensen and Meckling
theory of the firm
legal fiction
corporate responsibility
corporate regulation
economics of corporate law

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10.1093/oep/gpaa012Licence: CC BY

Gindis_2020_OEP_JM76
© Oxford University Press 2020. This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted reuse, distribution, and reproduction in any medium, provided the original work is properly cited.
Final published version, 246 KBLicence: CC BY

Cite this

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On the Origins, Meaning and Influence of Jensen and Meckling's Definition of the Firm

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