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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 involving tunnelling. Several important legal cases from France, Belgium, and Italy illustrate how and why the law accommodaates 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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    References listed on IDEAS

    1. 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.
    2. 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.
    3. repec:hrv:faseco:30728041 is not listed on IDEAS
    4. 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.
    5. Kevin Keasey & Steve Thompson & Mike Wright (ed.), 1999. "Corporate Governance," Books, Edward Elgar Publishing, volume 0, number 1708.
    6. 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.
    7. repec:hrv:faseco:30747162 is not listed on IDEAS
    8. Vives,Xavier (ed.), 2000. "Corporate Governance," Cambridge Books, Cambridge University Press, number 9780521781640, March.
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    Cited by:

    1. Daniel A. Schiffman, 2001. "Determinants of Railroad Capital Structure, 1830-1885," Working Papers 2001-15, Bar-Ilan University, Department of Economics.
    2. Zhuravskaya, Ekaterina V., 2000. "Incentives to provide local public goods: fiscal federalism, Russian style," Journal of Public Economics, Elsevier, vol. 76(3), pages 337-368, June.
    3. Bernardo Bortolotti & Mara Faccio, 2004. "Reluctant Privatization," Working Papers 2004.130, Fondazione Eni Enrico Mattei.
    4. Muravyev, Alexander, 2004. "The puzzle of dual class stock in Russia: Explaining the price differential between common and preferred shares," MPRA Paper 27726, University Library of Munich, Germany.
    5. Lambert-Mogiliansky, Ariane & Sonin, Konstantin & Zhuravskaya, Ekaterina, 2000. "Capture of Bankruptcy: Theory and Evidence from Russia," CEPR Discussion Papers 2488, C.E.P.R. Discussion Papers.
    6. Hoshino, Taeko, 2004. "Family Business in Mexico: Responses to Human Resource Limitations and Management Succession," IDE Discussion Papers 12, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. Irena Grosfeld & Iraj Hashi, 2004. "The emergence of large shareholders in mass privatized firms: Evidence from Poland and the Czech Republic," William Davidson Institute Working Papers Series 2004-718, William Davidson Institute at the University of Michigan.
    8. Manoj Pant & Prabal Roy Chowdhury & Gurbachan Singh, 2009. "Financial Intermediation and Employment," Review of Market Integration, India Development Foundation, vol. 1(1), pages 61-82, April.
    9. Alexander Muravyev, 2007. "Dual Class Stock in Russia: What Explains the Price Differential between Common and Preferred Shares?," Discussion Papers of DIW Berlin 680, DIW Berlin, German Institute for Economic Research.
    10. Mario García Molina, 2010. "Crisis y diversificación de los grupos empresariales colombianos a finales de los noventa," DOCUMENTOS DE TRABAJO - ESCUELA DE ECONOMÍA 007571, UN - RCE - CID.
    11. Friedman, Eric & Johnson, Simon & Mitton, Todd, 2003. "Propping and tunneling," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 732-750, December.
    12. Sonja Fagernäs, 2006. "How do family ties, boards and regulation affect pay at the top? Evidence for Indian CEOs," Working Papers wp335, Centre for Business Research, University of Cambridge.
    13. John Armour & B.R. Cheffins & D.A. Skeel Jr., 2002. "Corporate Ownership Structure and the Evolution of Bankruptcy Law in the US and UK," Working Papers wp226, Centre for Business Research, University of Cambridge.
    14. Mario García Molina, 2011. "Esquema para el análisis de la estructura de un grupo económico," DOCUMENTOS DE TRABAJO - ESCUELA DE ECONOMÍA 007957, UN - RCE - CID.

    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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