Tax and the Separation of Ownership and Control
Steven A. Bank
University of California, Los Angeles (UCLA) - School of Law
Brian R. Cheffins
University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)
TAX AND CORPORATE GOVERNANCE, Wolfgang Schoen, ed., Springer, 2008
UCLA School of Law, Law-Econ Research Paper No. 08-09
While generally the impact tax has on patterns of corporate ownership and control has received little attention, this paper argues that tax is potentially an important determinant of ownership patterns in large companies. The paper focuses mainly on historical developments in Britain, where an outsider/arm's-length system of corporate governance began to take shape after World War I and became fully entrenched by the end of the 1970s. Taxes imposed on corporate profits, taxation of managerial and investment income and inheritance taxes do much to explain why during this period blockholders sought to exit and why there was sufficient demand for shares among investors to permit ownership to separate from control. The paper also discusses developments in the United States and argues that tax helped to foster the separation of ownership and control that reportedly occurred in larger American companies after World War I.
Number of Pages in PDF File: 52
Keywords: corporate ownership, taxation, separation of ownership and control, historical tax developments in Britain and the U.S.
JEL Classification: G34, H24, H25, G15Accepted Paper Series
Date posted: April 14, 2008 ; Last revised: October 19, 2010
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