15 Pages Posted: 25 Jan 2000
Date Written: January 2000
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.
JEL Classification: G3, G38, K22
Suggested Citation: Suggested Citation
Johnson, Simon and La Porta, Rafael and Lopez de Silanes, Florencio and Shleifer, Andrei, Tunnelling (January 2000). Harvard Institute of Economic Research Paper No. 1887. Available at SSRN: https://ssrn.com/abstract=204868 or http://dx.doi.org/10.2139/ssrn.204868