14. Corporate ownership varies around the world. Historically, individuals have owned the majority of shares in public corporations in the United States. In Canada, this is also the case, but ownership is more often concentrated in the hands of a majority shareholder. In Germany and Japan, banks, other financial institutions, and large companies own most of the shares in public corporations. How do you think these ownership differences affect the severity of agency costs in different countries? (LO4) We would expect agency problems to be less severe in other countries, primarily due to the relatively small percentage of individual ownership. Fewer individual owners means that each individual owner has a greater incentive to monitor and control the firm-i.e. there is less free-riding. The high percentage of institutional ownership might lead to a higher degree of agreement between owners and managers on decisions concerning risky projects. In addition, institutions may be better able to implement effective monitoring mechanisms on managers than can individual owners, based on the institutions' deeper resources and experiences with their own management. The increase in institutional ownership of stock in Canada and in the United States and the growing activism of these large shareholder groups may lead to a reduction in agency problems for Canadian and U.S. corporations and a more efficient market for corporate control.