Abstract

http://ssrn.com/abstract=746945
 
 

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Taxation and the Evolution of Aggregate Corporate Ownership Concentration


Dhammika Dharmapala


University of Illinois College of Law

Mihir A. Desai


Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Winnie Fung


Harvard University - Department of Economics; Harvard Business School

December 2005


Abstract:     
Legal rules, politics and behavioral factors have all been emphasized as explanatory factors in analyses of the determinants of the concentration of corporate ownership and stock market participation. An extension of standard tax clientele arguments demonstrates that changes in the progressivity of taxes can also significantly influence patterns of equity ownership. A novel index of the concentration of corporate ownership over the twentieth century in the U.S. provides the opportunity to quantitatively test for the role of taxes in shaping ownership concentration. The index of ownership concentration is characterized by considerable time series variation, with significant diffusion of ownership in the post WWII era and reconcentration in the late 1990s. Analysis of this index indicates that the progressivity of taxation significantly influences corporate ownership concentration and equity market participation as predicted by the model. This evidence supports the intuition of Berle and Means (1932) that taxation can significantly influence patterns of equity ownership.

Number of Pages in PDF File: 40

Keywords: Taxes, corporate governance, equity market participation

JEL Classification: G30, G32, H24

working papers series


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Date posted: June 23, 2005  

Suggested Citation

Dharmapala, Dhammika and Desai, Mihir A. and Fung, Winnie, Taxation and the Evolution of Aggregate Corporate Ownership Concentration (December 2005). Available at SSRN: http://ssrn.com/abstract=746945 or http://dx.doi.org/10.2139/ssrn.746945

Contact Information

Dhammika Dharmapala
University of Illinois College of Law ( email )
504 E. Pennsylvania Avenue
Champaign, IL 61820
United States
Mihir A. Desai (Contact Author)
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6693 (Phone)
617-496-6592 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Winnie Fung
Harvard University - Department of Economics ( email )
Littauer Center
Cambridge, MA 02138
United States
Harvard Business School
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
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