The effect of estate tax change on the controlling shareholding structure and corporate value of family firms

Yin-Hua Yeh*, Chen Chieh Liao

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


Manuscript type: Empirical. Research question/issue: Estate tax planning has always been a primary concern of large shareholders when arranging the controlling shareholding structure of family firms. This paper provides evidence on the effect of a drastic change in estate tax on the shareholding structure of family-controlled firms in Taiwan, as well as the impact of these changes on the firms' corporate value. We examine a 2008 policy change in Taiwan that substantially reduced the estate tax from a maximum rate of 50% to a single tax rate of 10%. Research findings/insights: We analyze a 12-year period from 2002 to 2014 looking at data of family-controlled, listed companies with IPOs prior to 2001. The empirical results reveal a reduced motivation among controlling families to circumvent estate tax through altering the shareholding structure after the law change. The results also reveal a positive impact on firm value as a result of the reduction in the tax burden of controlling families. These findings contribute to the family firm and tax literature and provide insight into the effects of tax policy change on the controlling structure of family firms and the consequent benefits on firm value. Theoretical/academic implications: To the best of our knowledge, this paper is the first empirical study that establishes a significant relationship between estate tax and tax-avoidance behaviors reflected in the change of the shareholding structure of a family firm. Many research topics linking estate tax with other corporate governance issues in family firms are here unexplored. Practitioner/policy implications: For the policymaker, this study highlights the increase of firm value due to a reduction in the estate tax rate. Moreover, a tax-friendly environment can help the controlling family commit themselves to the proper management of the firm instead of expending effort on tax minimization to safeguard their wealth.

Original languageEnglish
Pages (from-to)33-44
Number of pages12
JournalCorporate Governance: An International Review
Issue number1
StatePublished - 1 Jan 2019


  • Corporate Governance
  • Family ownership
  • Legal Effectiveness
  • Ownership Mechanisms
  • Taiwan

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