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Corporate Ownership and ControlBritish Business Transformed$
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Brian R. Cheffins

Print publication date: 2008

Print ISBN-13: 9780199236978

Published to Oxford Scholarship Online: January 2009

DOI: 10.1093/acprof:oso/9780199236978.001.0001

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1940–1990: The Buy Side

1940–1990: The Buy Side

(p.337) TEN 1940–1990: The Buy Side
Corporate Ownership and Control

Brian R. Cheffins

Oxford University Press

While outsider/arm's-length corporate governance became pre-dominant in Britain between 1940 and 1990, as this chapter describes, there were various deterrents to investing in shares (e.g., Britain's economic decline, heavy taxation, and a hesitant commitment to shareholder value among executives). Individuals were in fact net sellers of shares but institutional investors — primarily pension funds and insurers — filled the gap as they were obliged to invest a tax-driven ‘wall of money’ and readjusted their investment portfolios in favour of equities. Exchange controls ‘trapping’ investment capital in the UK, the performance of shares relative to other options, increasingly thorough disclosure regulation, and the emergence of shareholder-friendly takeover activity all helped to sustain demand for shares. The dramatic rise of institutional investment created hospitable conditions for ‘hands on’ involvement in the management of public companies but the potential for intervention went largely unfulfilled, thus ensuring the pre-eminence of outsider/arm's-length corporate governance.

Keywords:   corporate tax, shareholder value, institutional investors, pension funds, insurance companies, company law, London Stock Exchange, mergers, shareholder passivity

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