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TunnellingSimon JohnsonMassachusetts Institute of Technology (MIT) - Entrepreneurship Center; National Bureau of Economic Research (NBER) Rafael La PortaDartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER) Florencio Lopez de SilanesEDHEC Business School; National Bureau of Economic Research (NBER); Tinbergen Institute Andrei ShleiferHarvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI) February 2000 NBER Working Paper No. w7523 Abstract: Tunnelling is defined as the transfer of assets and profits out of firms for the benefit of their controlling shareholders. We describe the various forms that tunnelling can take, and examine under what circumstances it is legal. We discuss two important legal principles -- the duty of care and the duty of loyalty -- which courts use to analyze cases involving tunnelling. Several important legal cases from France, Belgium, and Italy illustrate how and why the law accommodates tunnelling in civil law countries, and why certain kinds of tunnelling are less likely to pass legal scrutiny in common law countries.
Number of Pages in PDF File: 14 working papers seriesDate posted: June 11, 2000Suggested CitationContact Information
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