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Tunneling

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Abstract

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.
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Suggested Citation

  • Simon Johnson, 2000. "Tunneling," American Economic Review, American Economic Association, vol. 90(2), pages 22-27, May.
    • Handle: RePEc:aea:aecrev:v:90:y:2000:i:2:p:22-27
    Note: DOI: 10.1257/aer.90.2.22
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    1. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    2. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    3. Johnson, Simon & Boone, Peter & Breach, Alasdair & Friedman, Eric, 2000. "Corporate governance in the Asian financial crisis," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 141-186.
    4. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    5. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, April.
    6. Simon Johnson & Andrei Shleifer, 1999. "Coase v. the Coasians," Harvard Institute of Economic Research Working Papers 1885, Harvard - Institute of Economic Research.
    7. Kevin Keasey & Steve Thompson & Mike Wright (ed.), 1999. "Corporate Governance," Books, Edward Elgar Publishing, volume 0, number 1708.
    8. Vives,Xavier (ed.), 2000. "Corporate Governance," Cambridge Books, Cambridge University Press, number 9780521781640, December.
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    More about this item

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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