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Tunneling, Florencio López De Silanes, Simon Johnson, Rafael La Porta , Andrei Shleifer
Tunneling, Florencio López De Silanes, Simon Johnson, Rafael La Porta , Andrei Shleifer
Florencio López de Silanes
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.
Agency Problems And Dividend Policies Around The World, Florencio López De Silanes, Robert Vishny , Andrei Shleifer
Agency Problems And Dividend Policies Around The World, Florencio López De Silanes, Robert Vishny , Andrei Shleifer
Florencio López de Silanes
This paper addresses the question of why firms pay dividends, the so-called "dividend puzzle," from the agency perspective. We outline two agency models of dividends. On what we call "the outcomes" model, dividends are the result of effective pressure by minority shareholders rights should be associated with higher dividends. On what we call "the substitutes" model, insiders choose to pay dividends to establish a reputation for a decent treatment of minority shareholders so that firms can raise equity finance in the future. Under this model, stronger minority shareholder rights reduce the need for establishing a reputation, and so should be …