An Empirical Examination of the Governance Choices of Income Trusts

30 Pages Posted: 14 Mar 2011

See all articles by Anita Anand

Anita Anand

University of Toronto - Faculty of Law

Edward Iacobucci

University of Toronto - Faculty of Law

Multiple version iconThere are 2 versions of this paper

Date Written: February 17, 2011

Abstract

Publicly traded trusts, known as income trusts, became very popular in recent years in Canada. Income trusts participate in a variety of industries, and do not simply fulfill specialized roles, like that of a special purpose entity in a securitization transaction. Because of the absence of mandatory statutory rules, these trusts have much greater freedom to choose particular governance terms than analogously situated corporations. In this article, we examine the individual declarations of trust (DOTs), which set out the governance regime for the firm, of 187 income trusts that listed on the Toronto Stock Exchange between 1996 and 2005. We compare private choices with respect to 25 mandatory terms found in the Canada Business Corporations Act (CBCA). Examining private choices of income trusts provides insight into the role of corporate law in supplementing/distorting private ordering in the corporate domain. On some dimensions, DOTs mimic the CBCA, but on other important dimensions, particularly remedial ones, they depart significantly from the CBCA. We also examine particular characteristics of the trust (e.g., its jurisdiction, size, industry, whether it listed as an IPO or by way of conversion from a corporation) in order to determine whether certain characteristics are associated with greater resemblance to the governance regime established in the CBCA. We find generally that certain jurisdictions (particularly Quebec) are statistically significantly and negatively correlated with CBCA provisions relative to others (Ontario), while year (2003 and beyond) is statistically significant and positively correlated with CBCA provisions. We find that industry, measured by type and one-digit SIC code, is statistically significant throughout the analysis. Firm size is also significant, though its relationship with CBCA adoption may be positive or negative depending on the particular provision in question.

Suggested Citation

Anand, Anita and Iacobucci, Edward M., An Empirical Examination of the Governance Choices of Income Trusts (February 17, 2011). Journal of Empirical Legal Studies, Vol. 8, Issue 1, pp. 147-176, 2011. Available at SSRN: https://ssrn.com/abstract=1784112 or http://dx.doi.org/10.1111/j.1740-1461.2010.01204.x

Anita Anand (Contact Author)

University of Toronto - Faculty of Law ( email )

78 Queen's Park
Toronto, Ontario M5S 2C5
Canada
4169464002 (Phone)

Edward M. Iacobucci

University of Toronto - Faculty of Law ( email )

78 and 84 Queen's Park
Toronto, Ontario M5S 2C5
Canada
416-978-2694 (Phone)
416-978-7899 (Fax)

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