Silke Rünger

The Effect of the German Tax Reform 2001

Whereas several studies have already analyzed the effect of TRA 2001 on single corporate divestiture choices, no investigation so far has dealt with demand side ownership effects of TRA 2001. Results in chapter 5 have shown, that TRA 2001 increased the supply of corporate shares since the number of disposals of corporate minority shareholders has significantly increased due to TRA 2001.

The Effect of Shareholder Taxation on Ownership Concentration

This chapter gives an overview of prior research investigating the determinants of corporate ownership concentration. Section 2.1 deals with the theoretical foundations of the determinants of corporate ownership. It shows why the separation of ownership and control led to a dispersion of ownership structures and why the composition of ownership structures is determined by agency conflicts between managers and owners as well as between owners.

The effect of shareholder taxation on corporate ownership structures

The Effect of Shareholder Taxation on Ownership Concentration.- Empirical Evidence on the Effect of Shareholder Taxation.- The Effect of Shareholder Taxation on Changes in Ownership.- German Corporate Capital Gains Taxation.- German Tax Reform 2001.

The Effect of the Repeal of the German Corporate Capital Gains Tax

Promoted as the ’best Christmas gift in the history of the German stock index’ the German TRA 2001 was believed to substantially alter the system of corporate control and corporate network holdings in Germany. The repeal of the corporate capital gains tax of 40% for the disposal of domestic holdings was expected to substantially change the investment decisions of German corporations.

Empirical Evidence on the Effect of Shareholder Taxation

As has been shown in chapter 2, the question what determines corporate ownership concentration has caught attention in the literature for a long time, starting with the seminal contribution of Berle / Means (1932). Their image of the modern firm, a quasi-public corporation, where a separation of ownership and control has taken place, has dominated the literature until the beginning 1990s. After that, studies comparing ownership concentration around the world have found out, that the Berle / Means image of the widely held firm does not generally hold. Public firms are found to be widely held only in the US and UK. Contrary, corporate ownership in continental Europe is highly concentrated.

The Effect of Shareholder Taxation on Changes in Ownership

As chapters 2 and 3 have shown, taxes can in influence the level of ownership concentration of a firm. Despite this, taxes also provide an incentive for owners to buy or sell blocks that would not have been bought or sold in a world without taxation. Taxes can therefore also in influence changes in corporate ownership. This chapter gives an overview of prior research on the effect of shareholder taxation on changes in corporate ownership. Section 4.1 deals with the taxation of individual investors and section 4.2 refers to corporate investors.