Trust Law, Corporate Law, and Capital Market Efficiency

25 Pages Posted: 31 Oct 2008

See all articles by Robert H. Sitkoff

Robert H. Sitkoff

Harvard University - Harvard Law School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 3 versions of this paper

Date Written: 2003


In both the publicly-traded corporation and the private donative trust a crucial task isto minimize the agency costs that arise from the separation of risk-bearing and manage-ment. But where the law of corporate governance evolved in the shadow of capital-market checks on agency costs, trust governance did not. Thus, even more than that of close corporations, the law and study of private trusts offers an illuminating counterfac-tual a control, as it were for a playful thought experiment about the importance of capital market efficiency to the law and study of public corporations. The animating idea for this essay is that many of the differences on the agency costs frontier between the public corporation and the private donative trust can be roughly attributed to their relative positions in modern capital markets and the related disparity in their residual claimants ease of exit. Among other things, this approach reveals a correlation between the trust law model and the views of corporate law scholars who doubt the ECMH and its implica-tions for corporate governance. The essay also discusses the use of market data for as-sessing breach and damages in corporate and trust litigation and for empirical evaluationof theoretical scholarly analysis in both fields. More generally, comparison of the gov-ernance of the public corporation and the private donative trust brings into view the im-portance of relative price efficiency for the modern approach to corporate governance.

Suggested Citation

Sitkoff, Robert H., Trust Law, Corporate Law, and Capital Market Efficiency (2003). NYU Working Paper No. CLB-06-027, Available at SSRN:

Robert H. Sitkoff (Contact Author)

Harvard University - Harvard Law School ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

HOME PAGE: http://

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics