We integrate a widely accepted version of the separation of ownership and control—Michael Jensen's (1986) free cash flow theory—into a dynamic equilibrium model, and study the effect of imperfect corporate control on asset prices and investment. Aggregate free cash flow of the corporate...

In 1992, turnover on the New York Stock Exchange was 48 percent. While there is no convincing theoretical prediction for assessing this number, observers may have the view that turnover is very high. The increase in turnover has been accompanied by a rise in institutional ownership. A regression...