Ownership Structure, Fraud, and Corporate Governance

A dispersed ownership system has widely disseminated shares and no dominant shareholder or group of shareholders. This is more commonly the share ownership pattern in the United States and the United Kingdom. A concentrated ownership system is more common in continental Europe. In this system one shareholder, family, or group of shareholders has majority or dominant control of companies. Different types of fraud are incentivized under each system. Dispersed ownership systems encourage earnings management, so executives benefit from short‐term performance measures. Concentrated control encourages appropriation of private benefits of control. Corporate governance is designed to protect shareholders' interests. Corporate ownerships systems have implications on the efficacy of governance techniques.