This article analyzes the value of a corporation as a function of_x000B_its ownership structure. Shareholders can acquire costly information_x000B_about the manager’s effort to produce output. Concentrating share_x000B_ownership leads the largest shareholder to (i) acquire more precise_x000B_signals of effort and (ii) modify the compensation contract. Better_x000B_monitoring increases output, and hence firm value. However, the (risk_x000B_averse) large shareholder bears more idiosyncratic firm risk as his_x000B_stake in the firm increases._x000B_ These forces equilibrate at a unique welfare maximizing ownership_x000B_structure. Under some conditions on the market for shares, investors_x000B_have incentives to trade toward the best ownership structure.