Taxation and the Evolution of Aggregate Corporate Ownership Concentration

40 Pages Posted: 9 Aug 2005

See all articles by Mihir A. Desai

Mihir A. Desai

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

Dhammika Dharmapala

University of Chicago Law School

Winnie Fung

Multiple version iconThere are 2 versions of this paper

Date Written: July 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.

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Suggested Citation

Desai, Mihir A. and Dharmapala, Dhammika and Fung, Winnie, Taxation and the Evolution of Aggregate Corporate Ownership Concentration (July 2005). NBER Working Paper Series, Vol. w11469, pp. -, 2005. Available at SSRN: https://ssrn.com/abstract=755705

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

Dhammika Dharmapala

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

No contact information is available for Winnie Fung

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