The design of securities

Milton Harris*, Artur Raviv

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

29 Scopus citations


This paper investigates the determinants of security design. We consider the assignment of both cash flows and voting rights, focusing on corporate control. We postulate that a conflict of interest exists between contestants for control and outside investors. The conflict arises because private benefits of control give contestants an incentive to acquire control even when this reduces firm value. Security design is a tool for resolving these conflicts and maximizing firm value. Our main result is that a single voting security is optimal.

Original languageEnglish (US)
Pages (from-to)255-287
Number of pages33
JournalJournal of Financial Economics
Issue number2
StatePublished - 1989

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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